Tag Archives: Retirement

The Six Personal Finance Animals

I’ve spent a few years around personal finance. Between going to the seminars, reading books, and seeing people online, it quickly becomes apparent that there are six kinds of people you’ll see around personal finance, all of them with their own animal personas:

The Mouse

Shy and quiet, the mouse is generally embarrassed to even be in the room with people. The Mouse is the person that usually comes from an upbringing where his parents have told him that it’s impolite to talk about money. A mouse is more likely to suffer in silence about his financial woes than he is to seek help.  Nearly everybody was a mouse at one point, but once a mouse gets over his skittishness, he’ll usually pick up the traits of one of the other animals.  The only way it could be worse for a mouse is if they are a cow.

The Cow

In some parts of the world, cows are sacred, in other parts they are slaughtered. When it comes to personal finance, cows are the ones that follow the herd, and when they get spooked, they stampede.  When it comes time to invest money, cows are usually the people who shout “sell” and panic when the markets make a slight correction.  Most of the investment advertisements you can hear on talk radio is aimed at the cows, as they want them to come together, get spooked, and start a massive sell-off, or stampede. You can reason with a cow, but they won’t always listen.  To get them to respond, you have to motivate them with fear.

The Rattlesnake

We all know a Rattlesnake or two. The rattle snake is the person that it wouldn’t surprise you if they had a fully stocked bunker in their basement, with a “Don’t Trust Anybody” bumper sticker on the door.  Rattlesnakes will preach about how personal finance is all about going to only pay cash for anything, and keeping gold and other precious metals as an investment vehicle. The reason I call these folks rattlesnakes is because like a rattlesnake, they’ll sit there, coiled up and making noise, causing other people to worry. Be careful with the advice of rattlesnakes – all their worrying is like a rocking chair: it’ll give you something to do, but it won’t get you far.  The best thing to do around rattlesnakes is true in both cases:  just get away and let them be. You can’t reason with a rattlesnake, and it’s better not to get bitten.

The Peacock

If you hang around a personal finance forum or blog, you’ll run into a peacock sooner or later. Normally, they’ll start a post with something along the lines of “How Am I Doing?” and then discloses that he has several million in his retirement accounts now.  It’s hard to feel sorry for the peacock, but they are typically looking for acceptance, and are probably just trying too hard.  The peacock will generally have his finances in order, but he’ll be rich and lonely (and possibly poor later in life) because of the way he flaunts his good fortune.

In general, the peacock is either a liar or a jerk, sometimes both. Don’t be a peacock. Tigers will eat a peacock for lunch.

The Turtle

Slow and steady, the turtle is trying to win the race. Paying off debt and being conservative in his investments, the turtle is moving himself towards a retirement, albeit slowly. The turtle has likely read several personal finance books, and has taken the general advice to heart, thinking that live is long and hard, so you should keep your nose to the grindstone. Turtles will clip coupons, save hard for their house and car, and save any tiny slice of their salary that remains into a 401(k) plan. A turtle will pray that nothing goes wrong in the 50+ years of career work that it will take to get himself enough savings to enjoy a brief retirement. There are worse animals to be than a turtle, but like turtles, the plans they make would be better suited to them if they shared the same life span.

The Tiger

Prowling through the jungle of personal finance is the tiger. He is savvy and always looking for new opportunities to increase both his savings and cash flow.  Credit card companies will call him a dead beat, and he wears it as a badge of honor.  What sets him apart from the other animals in the jungle is his cunning. A tiger will not just save money, but he will invest it and pounce on every opportunity. Every now and then, you’ll hear news about Tigers making attacks on unsuspecting victims, and think two things at the same time, “Why didn’t I think of that?” and “Man, somebody always has to go and ruin it for the rest of us.”

Being a tiger is one of the greatest financial feelings in the world, but it doesn’t come easy. A tiger won’t go and waste money, but instead plans his early retirement by knowing that if he saves 50% of his take-home pay, he could retire in 17 years, or if he saves 75%, he can retire in just 7 years. Knowing this, and knowing the rules of the game make a tiger the force to be reckoned when it comes to personal finance.

***A great example of a tiger attack is what happened when the U.S. Mint sold dollar coins direct to consumers online, in boxes of 250. With no shipping or processing fee, tigers would use their rewards cards to get the airline miles or cash back, and immediately deposit the money in the bank and pay off their credit cards. With the only costs being a trip or two to the bank, they were able to rack up millions of airline miles to be used for things like lifetime status, trips to Tahiti, and free flights all over the world. Unfortunately, the U.S. Mint put an end to the program.

Until next time,  snack on some more debt!

Getting Started

Personal finance is quite a jungle. Everywhere we look, there are pitfalls, unexpected emergencies,  interesting opportunities, and predators that, if given the chance, will eat you (and your money) alive.  The important thing to remember about personal finance is that it’s exactly that — personal.  Two people aren’t going to get along with the same advice, and the situations that people find themselves in aren’t always ideal.  Personally, I’ve seen the worst of things happen. Losing a job, defaulting on credit cards and student loans,  resorting to payday loans and getting caught in their trap are all things I both grew up with and saw myself on the path to before I worked my way out of the mess.  At one point, I was in a situation with a car loan for 23% because it was the only thing I could get credit on.  All of this led to quite a sobering epiphany for me: the more you try to hide from your money problems instead of confronting them, the worse they will get.

This blog is brand new, but the ability to talk about finances in a rational manner is what will make everybody involved better off. The fact is, sometimes NOT borrowing money is worse for a person than borrowing too much.  With a background in economics, I want to help people understand where they are going wrong, and move them in the right direction. Some of the information here can be labeled as controversial, but I’ll do my best to provide a heads up when I talk about something that goes off the beaten path from what most personal finance “experts” spoon feed to their audiences. For reference, I’ve put together a quick list of my own “ten commandments” for personal finance, which should  provide some insight.

  1. Be Honest with yourself and your loved ones about finances.  – Lying will only make things bad in the short run at best, and horrible in the long run at worst.
  2. Learn to understand cash flow, and how it impacts your life. –  People don’t get in financial trouble from debt, they get in financial trouble by using debt to augment their cash flow.
  3.  There are two fundamental components to getting out of debt faster: spending less and earning more. – If you are serious about getting out of any debt you have, these are your options.
  4. If you have any question about being able to afford something, you can’t afford it. – Sure, a 70″ LED TV would look great in your living room, but the $1400 it would cost at 26.99% interest that that store card will charge you is not worth it.  Would you rather work 200 hours or 253 hours for something?
  5. If you don’t have a plan, you’re falling behind. – The old saying, “Failing to plan is planning to fail” is  very true with your finances. If you want to get the most out of them, you need to have a plan. Whether you want to systematically eliminate your debts, buy a house, or retire, you’ll need a plan to get there. Living paycheck to paycheck and hoping for things to “just work out” is a recipe for disaster.
  6. Good or bad, own your financial decisions. – Whether you went and bought a boat, or you decided not to take that trip to Mexico with all of your friends, the decisions we make can go beyond our bank accounts, so the important thing to know is that you never want to deprive yourself of experiences, or be unable to make ends meet because of your decision to either save or borrow too much. As with all things, moderation is the key.
  7.  Never be afraid to ask. – When I was young and dumb, I was always afraid to talk to my creditors, so I didn’t.  As a result, I likely missed out on the chance to fix a lot of things, and pay lower interest rate. Just about everything in life is negotiable. Ask for lower interest rates for everything you have to finance.
  8. Don’t become a slave to your credit score. – A single number will not define your value as a human being.  Check your credit report every 3-6 months to make sure it’s up to date, and pay down your balances to under 10% of your utilization (with the optional step of closing your newest credit line) 2 months prior to a major purchase (Home, Car, Boat, etc.)
  9. Pay your bills on time, not early, not late. – If you have an interest checking account, paying early will lower your average daily balance for the monthly interest, and paying late will result in a late fee.  Getting in the habit of paying on the due date will make your life much easier and have a (marginal) financial benefit for you.
  10. If you can’t keep your finances straight, use multiple bank accounts or the envelope method.  – This will help you avoid overdrafts, especially if you have multiple accounts, but only one of them linked to a debit card. Personally, I use a cash back rewards card that gets my spending money transferred to it bi-weekly to pay off the balance.

If you follow these, your financial situation should improve at every turn.  The harshest truth is that the odds are highly unlikely that you will win the lottery and become an instant multi-millionaire.  As a result, it’s going to be better to do the little things right so that you can live the best life possible.

That’s all for now. Until next time, go snack on some debt!