Wednesday, November 26, 2008

Pausing to Give Many Thanks

There's a lot of less than cheery news out there. People are "worried", "fearful", having to "cut back", etc., etc. This isn't surprising since all it takes is the push of an "on" button to hear or watch news about the next development in our "global economic crisis". It's even more depressing for those pain and drama seekers hell bent on checking on their investments day after day.

So what does a LMF4HMW reader have to be thankful for on this day before a national ode to Thanks? A lot.

Clean Water.
Many in this world do not have this basic source of life that we take for granted every day. Ditto food, shelter, and a warm bed. How rough must it be for those going to "bed" hungry on the cold streets? Freedom. The U.S. is an incredible country. It seems that many focus on tearing it apart and sadly, it can be easy to forget the sacrifices made by our service men and women. Education. It's an investment with a sky-high, linear return. Family, friends and loved ones. Without them, life would be so much less rich. Health. If you found out you had a terrible, life-threatening illness today, would a portfolio return, work project or anything that's currently frustrating you really matter? Time. Every minute of every day is precious. And we get to choose how to spend it given our gifts of freedom, education, health and those with whom we have meaningful relationships.

Spend some time during the next day thinking about how truly lucky you are to have the aforementioned gifts. Ponder how you might best give something of yourself. And how you can develop gratitude and peace given these benefits. Most of all, pledge to think more this way in your life throughout the year -- not just on this very special day of Thanks.

Friday, November 21, 2008

The Santa-Grinch Spectrum

SANTA
Pros- everyone loves ya; lots of cheer awarded to loved ones
Cons- habitual over spender; paying a lot more for cheer given financing costs

VS. GRINCH
Pros- never over spends; no credit card debt
Cons- black sheep of gathering; nothing in return

So which one are you during the holidays? Big bubbly Santa with tons of gifts and a big Visa hangover come January? Or Grinch with a dour predictions and a feeling of loss as the New Year rings in?

Most cheery Americans and HMW tend to be Santa-like. We grow up bombarded by holiday "spend, spend, spend" messages. The music starts playing in the stores in October and is downright ear numbing by December." This predisposition is actually great for our consumption- and service- based economy. But it's not so great for our wallet. Nor the waist as it turns out -- it's no coincidence that over-spend and over-eat/drink are partners in crime.

As a LMF4HMW, I'm certainly not advising that you become a Grinch. How would we put the "fun" in dysfunctional during all those holiday gatherings without some good cheer? I'm merely suggesting that you create a plan before the merriment officially begins and stick with it no matter how many eggnogtinis you down before embarrassing yourself in front of your mother-in-law. The following are a few ideas -- I'm sure you can come up with more:

1. Make a good old fashioned budget. Decide for whom you're buying and how much. Be sure to total it so that you can see how much you're actually spending -- $50 times 20 gifts seems a lot less brutal than $1000 line item on a bill. That way, when you're a couple of drinks in at the shopping mall (or online -- who has patience for those lines?!!) you're not side-tracked by the latest-greatest-three-times-what-you've-planned-to-spend-she-deserves-it(buy me!)-what-the-hell-it's-holiday-season gift.

2. Consider a gift exchange. Draw "secret" names between your key groups - maybe one or two circles of friends, the office pool and your family. Set a mutually agreed upon budget per person and enjoy the suspense. Most people will instinctively choose $50 or $100+, which is fine as you're shopping for one not ten. But consider the $15 and under limit because your compadres' creativity might surprise you. One of the best holiday gifts I ever received was a delicious book -- I gobbled it up within a day and could still fit into my skinny jeans!

3. Send holiday postcards - like to send holiday letters and photo cards? I do -- in fact, I'm so into it that I've already received mine for 2008! Save yourself some time and money by sending postcards. VistaPrint has some mighty fine deals and even customizable options.

4. Host potlucks partays - fan of the festive gatherings? Who isn't, really?!! Why not ask each invitee to bring a favorite hometown holiday dish and a bottle of cheer? You'll create quite the assortment and cut way down on your expenses. And you don't have to feel guilty because you're still the one doing all the clean up the next day!

5. Ignore #1-4 above and get seriously real. I recently heard an announcement on the radio about ReThink Christmas. I thought it was about creating donation or charitable type wish lists specifically and more generally promoting the idea of a return to a less consumerism-focused holiday. Turns out that it's that plus more: ReThink is a message started by a church, Advent Conspiracy, which seeks to have people "worship fully, spend less, give more and love all". While I don't tend to be a religious type, the message is quite valuable. Even if you're not Christian or religious. And the bottom line for them is promoting clean water through Living Water.

Even if you don't want to forgo gifting and spending, do spend some time giving the most valuable resources -- serve food, donate water, or build shelter. These are the gifts that truly do keep on giving. And the ROI is beyond calculation!

Wednesday, November 5, 2008

One of the Lucky Ones...

So consider yourself a very lucky LMF4HMW reader if you meet the following criteria: 1) you're contributing the maximum amount to your 401(k); and 2) you're contributing the maximum amount to your IRA or Roth IRA. You're well on your way to a bright financial future given that you're annually saving $20,500 if you're under 50 and $25,500 if you're older! In addition to the impressive annual savings rate, the powers of market returns and compounding will both boost your investment earnings significantly over time.

So what's a girl who's already a golden LMF4HMW member to do? Splurge on another pair of $200 jeans? Spring for that Fendi bag? Book a trip to Bali? Buy a new luxury car? You're owed some sort of reward, right?!!

The best answer and the commensurate size of your reward depends on your overall financial house. You've earned yourself a significant reward if you meet the following criteria: 1) all of your bills are paid on time, all the time; 2)you have six months of living expenses saved as a SDH* cushion; 3) and you're debt free (i.e., neither Visa nor Mastercard has you in a financial headlock). Trip, car, you name it! If you're quite not there or a ways from this point, the relative size of your treat should be smaller (spa day, anyone?).

For those winning the jackpot given a sparkling financial house, after you've rewarded yourself, it's time to open a taxable account and yes, contribute more. Perhaps it's your bonus or a percentage therefor, the money you save after (finally) finishing paying Social Security taxes each year (that period seems to come later and later), or the raise you get. In any event, you're going to deposit a sum of after tax money and purchase more financial assets.

Any financial planner worth her salt will advise that you look at your entire portfolio (retirement accounts, savings, etc.) to determine the best investments. If your 401(k) doesn't offer a fund with a certain class of stocks (i.e., small cap or mid-cap), or international or emerging market investments, a taxable account is the place to round our your overall portfolio. The easiest thing to do is invest in low cost index or exchange traded funds and plan to hold them for the long term.

Happy splurging and saving!

*SDH - a.k.a.,"sh*t does happen"; job loss, car trouble, family issues, pet surgery, unforeseen problems, etc.