More Bang For Your Buck

Posted by random olio

Recently I posted about: All the Money in the World: What the Happiest People Know About Getting and Spending, by Laura Vanderkam. One of the things she mentions is that the average cost of an engagement ring today is: $5,392. Wow. That could be a used car for some folks. Add the engagement ring to the cost of the wedding itself (flowers, dress, reception, food, venue, etc). It adds up quickly. My question is – is it all necessary? Chris and I got married on a beach in Hawaii for basically the cost of a honeymoon. Even doing that, it was expensive, but it was nothing like what the cost could have been if we had a traditional wedding + a honeymoon. I appreciate what Laura says in her book:

“With the same $5,392 the average couple spends on an engagement ring, a set of new parents could pay a babysitter $50 a night for 107 nights so they could have time to themselves or go neck in their car like teenagers. The $12,124 The Knot reports the average couple spends on a reception venue could cover a $100 housecleaning service, twice a month, for the entire five years many two-kid couples spend in that sticky stage when children spill milk just to see what will happen. The average $1,988 florist and decor bill could be doled out, instead, as 198 thinking-of-you $10 bouquets–a once-a-month gesture of love for a solid 16.5 years.” page 22

Laura also talks about what would bring more joy to your marriage. Does the American Dream and picket fence really make you satisfied? Or are you more interested in traveling and learning about other cultures? If so, are you paying more for a car or home then you really need? Are you doing it because it makes you happy, or is it because it is what you think you should be doing? What is more responsible? What causes you less stress? I often think of things pertaining to money in terms of justification. If I do not buy this now, I will have enough money for something else later. Much like what Laura mentions about $1,988 in flowers could give you 198 $10 thinking of you bouquets a month for 16.5 months. What has more bang for your buck?

We have so many different ideas and options before us. Are we asking the questions of what is best for us and our families, or are we making choices just to keep up with the Jones’? Do we really need the big elaborate wedding, or engagement ring, or are we best prepared if we put that money towards our future? Or towards our emergency funds?

What do you think?

Are you a DINK? Or a DEWKs?

Posted by random olio

I think we have all heard of the term DINK, which is an acronym for: dual income no kids. Until recently I had not heard of the term DEWKs: dually employed with kids or SITCOM: single income, two children, oppressive mortgage. Right now I am feeling for the SITCOM, at least the OM part. All these acronyms come from the many ideas I read in: “All the Money in the World: What the Happiest People Know About Getting and Spending” by Laura Vanderkam.

She mentions talking to your children about money, and making it part of their upbringing. I do not have children yet, but I have a feeling that my kids will think I am like a broken record, because I will definitely be teaching them about money just as I will teach them about respect, love, trust, the list goes on. I want them to feel comfortable talking about money. I like what the author says in the following quote about an internal locus of control. This allows kids to chart their own course and work hard on their own merits. I know it has always felt nice when I have attained something on my own, rather than on the shirt tails of another.

“The best thing we can do for our kids, economically, is to teach them to be entrepreneurial. A big chunk of this is helping them develop an internal locus of control–that is, the belief that they are responsible for making their way in the world. No one is going to hand them a job or an opportunity. They will have to seek it out.” page. 139

Another ideal that I would like my kids to see me follow is that we are living within our means. I want to show them, whether with our own finances or with examples, how it is possible to live within your means based on choices that we make. I have seen so many horror stories on Oprah and other shows about parents that give their children everything they want and are not even remotely able to pay for it. To me this is “keeping up with the Jones.” Laura says that children’s mindsets are shaped between 8 and 12 years old.

“Talk about why a lower interest rate on a mortgage matters in terms of monthly payments, and if you’re working extra hours to afford a particular vacation or to get out of debt, make sure they see the connection. Keep in mind that in a cashless culture, kids may have a harder time grasping what money really is.” page 213

It should mean that children will have more respect for their parents and the material possessions they do have, and hopefully connect the dots to see all that a parent is doing to provide for their children. I can understand parents wanting to protect or shield their kids from knowing if things are tight, or that their financial situation is dire, however, I think it is possible to educate without instilling fear.

“If your children see you paying your bills on time, living on less than you make, and putting money away for the future, this becomes the norm. If your young children have savings accounts and simply learn that a percentage of birthday and holiday money always goes there, this will be an incredibly difficult habit to break later on. Saving will feel like brushing their teeth.” page 212

She also tells us to let children fail, that we should teach our kids the “value of the dollar.” She says to encourage children to figure out their values about money (and that means we should probably know ours). I learned my values about money the hard way. I had many jobs during college, juggling them to pay for school, while also babysitting on the side. Some friends got to sleep in and take classes all day (or have just 3 classes all day and that was all they were responsible for). I was in a work/study program and then worked extra on the side so I could go out and have a little spending money for food or a movie with friends. I definitely did not take what I earned for granted, I worked hard to pay for school, and knew what an opportunity my college education was for me.

So regardless of if you are a DINK, DEWK, or SITCOM, what are your money values?

Emotional decisions: Another cookie? New jeans?

Posted by random olio

So I just found out that yesterday was National Chocolate Chip Cookie Day. I had no idea. I did not see any details about a national day when I did my research for this blog post about Chocolate Cookies being the default cookie. On Sunday, I made the cookie recipe found on this blog post. So my heart must have known that National Chocolate Chip Cookie Day was just around the corner.

I digress. Enough about cookies. It is, however, a great introduction on an idea I just read about called: “gorging on gratification.” The idea comes from the book: “The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money” by Carl Richards. It is a great book on money and life planning. Carl is a financial planner by trade, but he talks about money in conjunction with life issues. It is a thought-provoking book since money is so intertwined with the choices we make in life. How does this pertain to chocolate chip cookies? Instant gratification. This article from The New York Times discusses Carl’s term: “gorging on gratification” and gives four ways we can delay or stop immediate gratification and keep more of your money in your bank account. I also appreciated this quote from Carl’s book on emotional decisions:

“Money decisions are emotional decisions—and making good money decisions requires emotional clarity. So try to pay attention to your emotions around money. This can be as simple as considering how you feel when you get your monthly investment statement or when a medical bill arrives in the mail. Acknowledging those feelings and being aware of their potential impact on your decisions can be important, often in ways that aren’t clear right away. I’ve found myself asking some really fundamental questions during the last several years. Who I can trust? What’s really important to me? What do I really value? How much is enough? How should I really be spending my time?” page 93

So maybe those freshly baked chocolate chip cookies are not so far from your credit card statement. Maybe self-control with cookies is not that far from self-control with money. Is it hard to control how many cookies you eat, or are they too hard to pass up? How about after you have had 5? Do they still taste as good as that first one? How about that 10th pair of jeans? Do you need them? Or are they different from the others in your closet?

Emotional clarity. Maybe that is a quality we need in all facets in our life. It is something I am definitely going to explore further!

Should kids have to work for an allowance?

Posted by random olio

I am still on a kick about the book: “All the Money in the World: What the Happiest People Know About Getting and Spending” by Laura Vanderkam. This is the topic that I have been mulling over: Kids and Allowance. On page 210, Laura says:

“For instance, should kids get an allowance? It seems like a straightforward way to teach them how to manage money. Give them $5-$10 a week, and let them handle their small purchases out of that. Likewise, financial education for high schoolers sounds smart. Given the proportion of adults who live paycheck to paycheck and don’t understand what the interest rates on their credit card mean in terms of payments, it can’t hurt to teach kids about money.”

I take it one step further and ask: Should kids have to work for an allowance? I think growing up, my sister, brother, and I occasionally received an allowance. We definitely had to work for it. I can remember often my father would check our work and if it was not done well, we would not get paid. Honestly I do not think they had the money to truly pay us an allowance, so finding our work not perfect was maybe a way out of paying us. Other times he would find things around the house to give us in payment for the chores we had done. Once I remember receiving a caramel/chocolate candy bar that we were selling for school. So I guess in my house growing up it was more of the barter system. Even with the odd and inconsistent payment system I experienced, I do believe there is a purpose and educational aspect of receiving an allowance for chores or tasks. It starts kids out at a young age to know what it means to work and get paid for it. It teaches the value of money. It could be that if a child was willing to do more, they could get paid more (like overtime for adults, if the parents have the funds to do so). Parents could also institute a bonus system for excellent quality of work or attitude just as some adults may receive a bonus based on performance depending on their company.

If parents give an allowance without having to work for it, what life skills are the kids learning? When they become adults do they receive money without having to work for it? Maybe if they have a trust fund, but for the rest of us, we have to work hard for the money we are paid. I believe that hard work makes us think differently about our money, what we purchase, and how we spend or save. Does working for an allowance teach kids the beginning value of money in their lives? One could make the point that kids can learn the value of money and saving without having to work for it. I agree that it can be taught, however, those kids that have the opportunity to learn about the basics of money and how to manage it, in addition to having to work for it is an even better educational life experience.

I wonder what would financial education look like for high schoolers? I had an economics course in high school where we learned about stocks and bonds. I remember the simulation of our “made up companies” and how well our stocks did, but I never learned about the basics: balancing a checkbook, my credit report, credit score, credit card debt, etc. It was almost as though we went straight to Economics 3.0 but skipped 1.0 and 2.0. If we allow teenagers to drive cars at 16 (in many states), and allow them to be in control of expensive, heavy machinery, then why do we not ever teach them about their financial future? Did you learn what you know now from your parents, or from trial and error as an adult?

What do you think? Should kids have to work for their allowance?