January 24, 2013

• Money Matters – Part Two

  Today I want to talk about the “First Step” of sound finances.

  Now, I realize this is a hot topic out there, because of the world wide craze of Dave Ramsey worshipping.  I have written about this before – I do NOT endorse (or even stomach) Dave Ramsey, and if you want to read more about that, you can do so, here (LINK).  He’s an asshole making craploads of money selling common sense in the name of Gawd to the church.  There’s a special level of hell set aside for him.  And I don’t want to talk about Dave Ramsey.

  More, I don’t want to talk about the logic of not buying what you can’t afford.  Not having credit cards, not taking out extra loans.  How you can’t get ahead by going in the hole… that’s like wanting to sail to a tropic island, and immediately filling your boat so full that you sink before leaving the shore.  I don’t want to talk about this, because it’s common sense.  Debt is bad, we all know it.  And because of the rampant stupidity in our nation, a lot of people are grounded right here at this first step: they don’t go anywhere until they do two basic things:

  1 – Become debt-free
  2 – Change their spending habits to STAY debt-free

  *Because Dave Ramsey told them so.*
  

  
  I’ll tell ya – we have been debt-free since 2007.  It wasn’t easy – Brian came in with a credit card, and I came into marriage with a capital reserve that was nearly maxed out.  We had a mortgage on a falling-apart, drafty house that we weren’t staying afloat with, we had a two-hour commute to anything (family/work/stores)… we were a mess.  We survived the first five years only because we had two incomes, but when I stayed home with our first baby, that’s when we started sinking.  To get out of that horrible situation, it required some tough decisions: we had to move to something smaller, more energy efficient that was closer to work/family.  We had to pay off the debt by splitting off acreage and selling it separately from our home.  We had to make concessions on space and location.  But the result was that we were debt-free… and that was the important thing, right?  WRONG.

  Now I’m going to shock you by telling you that while getting out of debt is extremely important to a healthy financial condition, it’s not THE most important thing to work on.  Dave Ramsey tells people that getting out of debt is the FIRST thing that you do.  I totally DO NOT agree.  And I’ll tell you why:  Because if you’re going to put in a yard, you don’t start with the grass – you start with the trees.  What do I mean?  I mean that the things that take the LONGEST to cultivate are the things that should be started earliest in the plan.  Likewise, if you are looking to have financial stability, you have to start with the things that take the LONGEST to compound.  If you start with eliminating debt, you might never get past that debt elimination step (especially if you can’t get a handle on your spending habits)… and then you never get to the stuff that takes the longest to ‘cultivate’.

  This is where we goofed up.  Sure, we got out of debt, and worked out our spending, but we didn’t cultivate our retirement at all.  In fact, most people don’t spend much time at all thinking about retirement.  And this is where I’ve messed up the worst.  Because now we’re looking at our forties, and we don’t have much of anything in place for the future.  Things that should’ve been ‘started’ and left to compound all along… starting at this point in the game is a bad thing.

  From what I’m reading, if an 18-year old person gets a job and puts away $2000/yr from it into a Roth IRA, and does that for three years in a row, and then stops and never touches that money again?  There’ll be a million dollars there when they are 70 years old.  He/she has done very little but will yield HUGE benefits from prudent foresight.  If you start at age 35, though, you have to sock away $100 a week to get to the same amount… because the earlier you start, the more time it has to compound.

  NOBODY ever taught me that.
  

  
  This is something that parents should teach their children, and their children’s children.  It’s something you’d think they would’ve taught us in school, but I don’t remember anything about sound finances from the public education I got.  WHY!?!?!  Don’t you think that taking care of yourself and your future generations should be EXTREMELY important to us?

  I gotta tell you – I don’t believe in retirement.  It’s a thing of the past.  People in our age range will NEVER retire.  This is because there are no more pensions.  Companies don’t have them, anymore, for the most part.  It’s also because the cost of living/inflation is going through the roof.  And we’ve seen the demise of retirement firsthand – Brian’s co-worker retired a year and a half ago.  He and his wife both had good incomes for their whole lives, had invested, had saved, and sold their house and retired.  They bought a travel trailer and moved to Florida, taking up a manager position in a retirement park.  They were back in less than 24 months… Rick back at the job with Brian, his wife back at hers.  Why?  Because it cost too much.  They couldn’t swing it.  They’d ran the numbers, worked decades at saving, and couldn’t afford it when they got to that point.

  We all know that there isn’t going to be Social Security for us when we get to 70 years of age.  We all know that there isn’t going to be a GM pension for us.  We have to rely on 401Ks and IRAs – our OWN efforts – to see to our needs in the future.  Unless you want to burden your children beyond belief, or become a needy person living off the state (and the days of THAT are nearly over, too).  So what do we do?

  We have to plant the trees FIRST.   Nevermind paying off debt, or getting rid of your credit card.  You can do that AFTER the trees are in.  The most important thing to do is start a retirement account.  Start it as early as you can.  Start it WITH your children, if possible.  It doesn’t have to be much… a few thousand (and you can start it with a small amount and add on as you can, making payments like you would on a loan).

  But this is the MOST IMPORTANT step to take.

  • 10:04 am
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