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Friday, November 18, 2011

High time?

What do you think? 






I think it's high time.

Tuesday, November 15, 2011

A new favorite blog

The following article is from the blog called Mom's Plans.  I recently started following her and her take on life/work/money is so exciting and refreshing.  She challenges me to be more than I think I can be.  Take the time to read this great article - you won't be disappointed.  


How Do You Behave During Financial Booms?

by MELISSA on NOVEMBER 15, 2011
Recently, when researching my staff writing post about the current job boom in North Dakota, I ran across an interesting article, “I Doubled My Salary in North Dakota.”  The article is about a man who had formerly worked in a factory in Nebraska, but lost his job thanks to the recession.  He took the leap of faith and moved to North Dakota and took a job in the oil fields.  He is not afraid to work hard and takes advantage of all of the overtime available.  He averages “on the low end. . . $92,000 a year, and [on the] high end. . . $130,000.”  Because I like good rags to riches stories, I was excited for him.  By working hard now, he has the potential to change his life forever.  He also sees the significance of what he is making, stating, “Where I’m from, the only people who make that kind of money are doctors or lawyers. And I don’t have a degree. . .”  His plan is simply “to make the most amount of money possible in the shortest amount of time possible.”
No one knows how long the oil boom will last, so his plan is a smart one.  Work hard now while the opportunity is available.  Before I could finish the article, my mind was already wandering with what he could do with that kind of salary for five or ten years—max out his retirement plan, start a college fund for his daughter, buy a house with a substantial down payment. . .His possibilities are really endless if he keeps his income low.  So, you could imagine my disappointment when I read on a bit.  He proudly states, “I’m able to buy everything my daughter has ever wanted — toys, clothes.”  I already sense where this is going.  Like one who can’t turn away from a car wreck, I read on.  He further states, “Before, I had a Jeep Wrangler and my wife had a Jeep Wrangler. So I was able to buy a brand new Mercedes, and my wife a Mercedes.”  Now I see that his future probably won’t be changed.  He may well likely be one of those people who win a multi-million dollar lottery and in a few years are bankrupt.  I hope not, but I have concerns for him.
Even more surprising, the airwaves and Internet have been abuzz with the story of Carl Richards, a financial planner who moved to Las Vegas right before the housing collapse, bought a house that was more than he could comfortably afford, repeatedly borrowed against the house as the equity grew, and then ultimately ended  up $200,000 upside down in his mortgage.  He and his wife stopped paying their mortgage and went through a short sale.  When interviewed on NPR and questioned why he, a financial planner, could get into such a financial mess, he explains:
“The value of the house is growing dramatically, my income’s growing dramatically and we all have this tendency to base the future on a relatively recent past. Right? So we project that into the future. And when you project that into the future, we had no problems.
And then the next mistake we made was not realizing that things change.”
What a powerful explanation.  He projected his success today into the future, and when he did that, he had no problems.  He didn’t make a contingency plan; he didn’t think things would change, but they did, rapidly.  This is human nature; to assume things will continue to go smoothly, which explains in part why it was so easy for the man who moved to North Dakota to buy two Mercedes.  Even though he doesn’t know when the oil boom will end, he anticipates living like this for quite a long while, even though he could be injured tomorrow, and the money would stop flowing in.
I have recently had the pleasure of watching Crystal from Budgeting in the Fun Stuff’s explosive financial growth.  This summer, she left a cubicle job where she was making $35,000 a year to work for herself as a blogger, writer, and advertising liaison.  While she was successful from the beginning and making at least as much being self-employed as she made at her old job, it is only in the last few months as her advertising business has taken off that her income has skyrocketed.  She is now averaging well over $10,000 a month in earnings, and she has been talking about her husband leaving his job as a school librarian to help her run her advertising business.
That fearful part of myself read the latest developments with some trepidation.  After all, blogging and advertising are very lucrative for her now, but they may not always be that way.  The blogging world is still very young; who knows how things will change in three years or five years.  Having her husband quit is quite a leap of faith.
Yet, unlike the others in this post, she is carefully laying the foundation for an even more secure future.  She is on track to pay off her house by the end of 2012, or at the latest, 2013.  She is not even 30 yet, and her house will be paid off.  She is fully funding her retirement, and she also has a large emergency fund.  While it would be easy (and natural, as Richards explains) to spend freely during this time in her life, she is choosing not to.  Sure, she may spend a little more for a nice dinner out, and she might buy sheets that are more expensive than most might buy, but she is not being reckless.
If her husband does quit, I believe they will be just fine.  If they continue to plan as well financially as they have been, they may both be able to retire by the time they are forty or younger.  And if that income stream dries up?  They will have a paid for house to live in, maxed out retirement funds and a hefty emergency fund.  In short, unlike our other two examples, they will be in a much better position than they were before her radical income jump.
When we find ourselves in a good financial position, we like to believe that our finances will be like this forever.  However, the nature of life is cyclical.  There are bound to be down times; while it is tempting to not plan as carefully for the future when things are good, it is ultimately in each of our best interests to do so.  Who would you rather model your financial behavior after? Carl Richards or Crystal?

Friday, November 11, 2011

Thoughts for the future....