eNewsletter: Volume
1, Edition 5, December 28th, 2007
The best financial advice ever
Prince Charming isn't coming. Live like a student. Never co-sign a
loan. Money experts like David Bach and readers like you share the
best nuggets of wisdom they have ever received.
By Liz Pulliam Weston
December 25, 2007
If you're doing well financially, chances are you had help.
Someone, somewhere along the way passed along a nugget of financial
wisdom that you took to heart. Maybe you absorbed the messages over
time from some role model, such as a parent or grandparent. Or perhaps
you just heard the right thing at the right time from a friend, an
adviser or even a total stranger.
If you're not doing well financially, maybe you're finally ready
to hear some advice that could make all the difference.
With that in mind, I asked experts and readers alike to share the
best financial advice they ever received. The results were varied
and enlightening.
Advice on saving
"No matter how much or how little you make, always save a little
bit."
This is a variation of "Pay yourself first" that Your Money
poster "kesslergk" heard from a grandfather. It's a reminder
that whatever money comes into your life, you can (and should) be
setting aside some of it.
"Save hard for the first 10 years of your married life."
This is the advice Your Money poster "Talk2Me2"received
from her mother (although to apply it to more people, I might amend
it to, "Save hard for the first 10 years of your adult life"
or "Keep living like a broke college student for as long as you
can").
"Saving hard means having to make a lot of the right choices,"
Talk2Me2 wrote. "We researched every purchase, learned how to
do lots of things ourselves (car repair, hair cutting, sewing, cooking,
home maintenance, etc.) and we could not only save money but we also
used these skills to make money. When you are young, doing with less
isn't a struggle because you aren't used to the luxuries yet. We also
had more time to bargain shop.
"Mom's advice certainly paid off. We still save money even when
we don't try to because we are in the habit of trying to do things
ourselves, doing without if we can't find it at the right price, researching,
waiting to buy, etc. We made a game out of getting what we want for
less money."
Talk back: Share the best advice you ever got
Advice on spending
"Know the difference between needs and wants."
Several posters also mentioned different versions of this advice,
which is key to controlling your spending. When you can't distinguish
between real needs and mere wants, you're constantly talking yourself
into spending too much.
Poster "ARCHIEtheDRAGON" recalls his mother asking, "What
do you need that for?" whenever he bought anything as a kid.
Annoying? Maybe. But "now I hear her voice in my head whenever
I am spending money. It keeps me from buying a lot of crap that I
don't need."
"JennysMom" illustrated it this way: "You need food.
You want prime rib. That example is perfect for the want vs. need
debate in my head!"
Poster "Clara Bear" said she heard similar advice from
her grandmother.
"Whenever I would complain about not having the newest coolest
clothes or whatever when I was younger, my grandmother would always
say, 'We have everything we need and most of what we want, too.' That
would make me realize that even though we weren't the richest family
in town, we really did have plenty. I still think about that today
when I'm lusting over some ridiculously expensive item at the mall.
It makes me remember that I have a place to live, plenty to eat and
a great family as well as much of the stuff I want. I (usually) put
the item back on the shelf and walk away satisfied with what I already
have."
"Think of the true cost."
Anything you want to buy involves a number of costs. The price tag
is just the start.
"I see something that would look great on my table," poster
"Mamasita99" wrote. "I have to give up the cash for
it that won't be able to work for me somewhere else. Then I have to
think of all the time and energy I'll waste cleaning this item, keeping
it out of my kids' hands, and packing it up and hauling it somewhere
else when we move in a year. Most of the time, the true cost of the
item is too high for me."
"Buy quality."
Sally Herigstad knows what it's like living on a tight budget. Before
she became a certified public accountant and author, she was a stay-at-home
mom who at one point fended off calls from collection agencies (an
experience she recounts in her book, "Help! I Can't Pay My Bills:
Surviving a Financial Crisis."
As Herigstad and her husband rebuilt their finances, though, she
remembered her mother's advice to buy quality when it counts.
"My mom can stretch a dollar farther than anyone I know, but
that doesn't mean she doesn't buy nice things. Mom taught us to buy
high-quality things at stores that stand behind what they sell. That
way, if anything wore out or quit working before its time, she knew
she could take it back -- and she often did. You actually save money
by buying things of higher quality that last than by getting cheap
stuff you have to throw away in no time."
"If your outgo exceeds your income, your upkeep will be your
downfall."
Poster "skywind" wrote that his grandfather often quoted
this saying. It's another way of saying, "Live within your means,"
or, more elaborately, "Be careful of adding new expenses to the
ones you've already got."
"So I'm always asking myself, am I putting out more than I'm
taking in?" skywind wrote. "If I am, I know I need to turn
that around, because it is unsustainable."
Advice on debt
"Don't pay interest on anything that loses value."
A bunch of posters cited variations on this theme of avoiding credit
card debt and borrowing only to buy property or other assets that
will appreciate.
Poster "dancinmama" was told by her parents "Never
pay interest on anything but real estate." In 27 years, she and
her husband have taken the advice to heart.
"We have never had a car loan or paid a penny of interest on
credit cards. We have saved our money and invested our money. I have
been a (stay-at-home mom) since 1986 so most of this time we did it
on one income, under 6 figures, on the central coast of California
(cost of living was not cheap). Our net worth is now in excess of
$2 million."
Poster "Honey Bucket" and her fiancé are just starting
out, but they're already living a variation on this advice, which
is "save today for what you want tomorrow."
"We've both been saving for retirement, wedding and housing.
The difference it will make is that we will be able to pay for things
instead of borrowing or having (credit card) debt. Our lives together
will be financially secure because of this!!!!"
"Don't co-sign a loan."
Co-signing puts your good credit in the hands of someone else --
who could trash it with a single late payment.
Poster "bookladyfdl" said her parents refused to co-sign
a car loan for her after she graduated college, and today she's grateful.
"They lovingly explained that their credit report would show
this loan, which could affect any loans they might need. They also
explained to me that their rule of thumb was not to co-sign for any
amounts they could not personally loan. If you can't afford to give
it, you can't afford to pay the loan back, should you have to do so.
"This credo saved me early in my marriage. Without my knowledge,
my husband agreed that we would co-sign on a loan his brother was
taking out. The papers came and I discovered that we were co-signing
on a large loan at 32% interest, and that the reason he was being
forced to take it out was that his brother had defaulted on a credit
card and this was the last step before court... Out of love for his
brother, my husband wanted to help out. However, I relied upon my
parents' advice, put my foot down and refused to let either of us
sign on the loan. Less than five years down the road, BIL and his
new wife have a terrible financial situation, raiding (retirement)
funds for car repairs, etc.
"If we'd have co-signed, I know we'd have been forced to pay
off that loan to preserve our own credit. Not only would we not have
been able to afford it, but it would have put an irreparable rift
in family relations. Mom and Dad taught me that sometimes you have
to take care of yourself and secure your future, even if it means
friends or family members may have a more difficult time."
Advice on building wealth
"If you need more money, then go out and make more money."
There are limits to how far you can scrimp and save. Often the fastest
way out of debt and into wealth is generating more income.
Poster "Avalon_2" learned this from parents whose educations
stopped by the sixth grade.
"Neither (was) afraid of hard work and we never lacked for anything
as I was growing up," Avalon_2 wrote. "They taught me that
as long as there is health, anything else can be worked for. To them
the word 'retirement' didn't exist. You work until you can't work
anymore.
"I've worked 2 and 3 jobs at a time and often while going to
school. To this day, I have a hard time not doing more than one thing
at a time."
"You pay in advance for capacity."
Dr. Lois Frankel, a career coach and author of the New York Times
best seller "Nice Girls Don't Get the Corner Office," heard
this bit of advice from a small-business adviser at the University
of Southern California.
"As the owner of what was at the time a small business... this
meant I had to invest more than just hard work in the business to
make it grow. I was trying to keep my overhead down and was doing
everything myself and driving myself crazy. So when I could least
afford it, I invested in hiring an assistant. (The adviser) was right
-- this freed me up to do more marketing and sales calls which in
turn led to landing more contracts. I've never forgotten this piece
of advice and each time I've followed it it's resulted in another
growth period for my company, Corporate Coaching International."
(Frankel is also the author of "Nice Girls Don't Get Rich"
and the soon-to-be-released "See Jane Lead.")
"Own your own business -- including the building it's in."
David Bach learned this lesson as a money manager for Morgan Stanley
before becoming the author of the New York Times best sellers "Start
Late, Finish Rich" and "The Automatic Millionaire."
"My wealthiest clients were clients who owned their own business.
The most important financial decision they made (that really made
them rich) was they bought the building their business was in. In
almost every case the building was ultimately worth more than the
business at the end of their career.
"Today I own the building (commercial condo) that my company
FinishRich Media is in. My building has appreciated more in two years
than I earned on my first four bestselling books in royalties."
"Don't gamble more than you can afford to lose."
My colleague, investment writer Jim Jubak, explains:
"When I was a kid, our big extended family would gather on Christmas
Eve for a big dinner of fish and my grandmother's pierogi, followed
by drinking, followed by singing off-key with my Uncle Eddie, followed
by more drinking. The evening always ended with the oldest kid, yours
truly, settled around a card table battling three adults in a game
of 25-cents a hand pinochle. I almost always came out a big winner
-- $4 or so -- mainly because by that time in the evening I was the
only one who could accurately count the pips on the cards. One year,
having puzzled it over in my head, I asked my Aunt Millie the logical
question: Why do you play cards with me every year when you know you're
going to lose? Swirling her vodka in her glass, she said to me: Because
I never gamble more than I can afford to lose. And then she pinched
my cheek.
"Hated the pinch. Appreciated the advice.
"Wall Street has developed lots of way more sophisticated methods
for controlling risk. But I think my Aunt's has one very real virtue
-- it keeps you focused on the real aim of the game, which isn't making
money for its own sake, but to have enough of the stuff to get you
where you want to go. It's helped me get over losses in bear markets
and in individual stocks. And reminded me that I can occasionally
take a flier, as long as the game in itself is fun and I'm not gambling
more than I can afford to lose."
Talk back: Share the best advice you ever got
"Prince Charming isn't coming."
Barbara Stanny came from a wealthy family (her father was the "R"
of the H&R Block tax preparation chain) and never learned much
about handling money. After her first husband lost a good portion
of her fortune and left her with a tax bill of more than $1 million,
Stanny asked her dad to lend her the money to pay the tax bill to
the government. He said no.
"That was the best thing he could've done," Stanny said.
Though he never said these exact words, the message was loud and clear:
'Prince Charming isn't coming. To truly achieve financial security,
your only protection is you.' That moment was the turning point for
me. I not only got smart enough to manage my own money (in less time
than I ever imagined possible), but I've written three books empowering
women to do the same."
"Prince Charmings leave, Prince Charmings die, Prince Charmings
aren't always such great money managers," said Stanny, whose
books include "Prince Charming Isn't Coming," to be re-released
May 2007, "Secrets of Six-Figure Women" and "Overcoming
Underearning."
"Your job is to participate in financial decisions from a place
of knowledge, not fear, ignorance or habit."
This advice isn't just for women, by the way. Anyone who's expecting
a lottery ticket, stock picker or other outside force to bail them
out is guilty of the Prince Charming syndrome. It's time to quit dreaming
and start taking charge.
Daniel La Tour
JustinCase.
JustinCaseInsurance.com
Canadian Independent Insurance Broker
Financial Security Advisor
Conseiller en securite financiere
Mutual Fund Representative (Quebec)
Courier Address:
147 Place Terry Fox,
Kirkland, Quebec
H9H 4Z5
Email: daniel.latour@justincaseinsurance.com
Website: www.JustinCaseInsurance.com
(514) 630-6116
Toll-Free: 1-888-977-7778
Toll-Free Fax: 1-888-637-2636
MSN Messenger: latourdaniel@msn.com
"We Make Sure You Have Enough Insurance, For Less Money ! "
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