September 2010 - Posts - The Dollar Stretcher
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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.

September 2010 - Posts

  • Directions

    Heard an interesting statement recently. The direction you're facing is more important that where you are in the journey. It seemed to ring true in our finances.

    Don't misunderstand. Where you are standing today is important. Especially if you're 60 years old and facing retirement with limited savings.

    But, where you are is a reflection of what you've done in the past. And, while that's important, it's still the past. You can't change what's already happened.

    You can change where you go in the future. To do that you need to consider what direction you're facing. And, to make sure that you're moving in the right direction.

    So, consider this list. To answer some you may need to do a little figuring. But, chances are that by the time you get to the bottom of the list you'll know whether you are heading in the right direction.

    • Is your net worth increasing or decreasing? (learn how to calculate your net worth here)
    • Are you adding to your monthly expenses? Or are you cutting monthly costs?
    • Have you learned new skills for home repairs? Are you using them?
    • Have you learned new skills that make you more valuable at work?
    • Have you developed financial goals? Are you monitoring your journey towards those goals.
    • How do you feel about your finances? Confident? Concerned? Worried?
    • Would you be embarrassed if others knew about your real financial situation?
    • Do you have more or less credit card debt than a year ago?
    • Do you know more about your finances than you did six months ago?
    • Do you have enough money to survive a six month loss of income? Or are you moving towards having enough money?
    • Are you attempting to learn more about personal finance on a regular basis?
    • Do you believe you can make a difference in your finances?
    • Do you even know which way you want to be facing? Or do you ignore your financial affairs?

    Admittedly, some of these questions are subjective. Others could require you to pull out an old bank, brokerage or credit card statement. Still others might even require a calculation. But, it's not too hard to get a pretty good idea which direction you're facing financially. Of course there are two final questions.

    • Which direction are you facing?
    • What are you going to do about it?

    So what do you think? Please add a comment below or send an email and add your voice to the discussion.

    Keep on Stretching those Dollars!


  • More on College Costs

    Just yesterday I wrote about the cost of college. Today I read a USA Today article on how student fees are going to support college athletic programs. They describe a school where roughly $1,000 a year from each student's fees goes to the athletic department. The article goes on to say that the NCAA division I schools raised nearly $800 million from student fees in one year.

    I'm all for school spirit. And, I have nothing against college athletics. But in a time when college costs have been rising at double or triple the inflation rate for decades and more students are graduating with outrageous levels of student loans, you have to wonder if this is the best that we can do for the next generation.

    Perhaps it's time to recognize that students cannot borrow an unlimited amount. And, that high profile programs like athletics are not required for a complete college experience.

    Add a comment or send me an email to let me know what you think. Should colleges be reducing the amount they charge in student fees even if that means cutting the budget of the athletics department?

    Keep on Stretching those Dollars!


  • The Cost of College

    Some things are personal. I admit that I can't help but look at the cost of college with a bit of a bias. You see I have two in college. One an undergrad, the other in grad school. So I've been forced to become familiar with the subject. 

    Then a couple of months ago (July 8th), I wondered whether college was a good goal for everyone.

    Shortly thereafter I did a column about taking on student loans. After a little math, it became clear that students should not take on total student loans that were greater than their realistic first year pay. So if they could expect to earn $30k the first year after graduation, their student loans shouldn't be greater than that. If the loans did get larger it would become difficult to repay them while keeping any kind of normal lifestyle. 

    Now today I saw an article about how college costs have increased needlessly. Many schools are better known for their luxury instead of their education. Administrators and others are getting wealthy by collecting tuition (and loan money) from parents like me. 

    For awhile I've been saying the same thing. The world has changed in this generation. First, for many fields there's no end to education. It's not like you can complete your learning in your 20's and then just use what you learned for the rest of your working life. Today, in so many jobs (even entry level ones) you find that learning is a regular, routine process. You always need to pick up new skills. Learn how to use new tools.

    The good news is that most of the time you don't need to go to an expensive school for that learning. Technology has made a number of teaching tools available that are much less expensive than the traditional college (or night school). Everything from online degrees to tutorials on Youtube.com. And, there's more available every day. 

    My prediction is that the old model of students moving to a college town and living on or near campus for 4 to 7 years will become outdated in the next ten years. Instead young adults will do more like they did centuries ago. They'll take a low level job in a field that they think might interest them. Not only will they get on the job training, but they'll also be expected to learn online. Since the cost of education will be fairly low, most employers will pick up the tab. In effect it will be a little like the appreticeships that were the norm in colonial times with a very modern twist.

    I'd like to know what you think. Does that sound realistic? Or am I just off on the wrong futuristic track? Add a comment and let's hear what you see for tomorrow.

    Keep on Stretching those Dollars!






  • The Financial Imposters

    I admit that my desk isn't perfectly neat. Ok, it's not even IMperfectly neat. It's not as bad as some, but it's worse than others. Just yesterday, stuck in the back I found a well-worn coin. About the size of a penny. Looked like it had been through many hands and pockets over a lot of years.

    When I looked more closely I got a surprise. On the one face was a picture of a bird. Much like the American eagle. Surrounded by stars around the edge of the coin.

    Then I flipped it over. There was writing. "No Cash Value" it said! The coin that had looked so official was really just an imposter.

    Thinking about that it occurred to me that we're faced with a lot of imposters in life. Things that look promising, but when you get close and examine them aren't what they appeared to be at first glance.

    The trick for us as consumers is to identify the imposters before we part with our money. How can we do that? There are a number of tools that we can use.

    • Listen to what the promise is. We often think we know what's being promised. But if we listen closely we realize that the actual promise wasn't as good as we thought it was.
    • Is the promise realistic? Could it really be that by trying a new shampoo that we'll get the beautiful girl and live happily ever after?
    • Consider who is making the promise. It could be that whoever is making the promise isn't capable of delivering on it. Unless they can guarantee delivery the promise is worthless.
    • Ask what the promiser would gain if we believe their promise. Typically they want to make a sale. But sometimes they're asking for a commitment that could go on for years.
    • Would that promise really make me happy? That burly pick-up truck could make me look more manly to those who see me in it. But, does that make me any happier?
    • What preconceived notions do I bring to the table? Are they playing to what I already believe?
    • Are my feelings about the product accurate? It could be that I'm replaying something from my past without checking it first.

    You get the idea. There are many ways for us to weed out the imposters. I'd love to hear some of the ways you test for them. Drop me an email  and let me know your tricks.

    Keep on Stretching those Dollars!


  • Your Trajectory

    Heard this recently and thought that it sounded true. Especially in the area of our finances.

    We determine the trajectory of our lives based on the decisions we make when times are tough. 

    Let's start by considering what a trajectory is. According to the Random House dictionary it's the "curve traced by a projectile object or body in its flight." In other words, for this quote it's the path that we're on. I picture the trajectory of a missile in flight. I don't know it for a fact, but I'd bet that the course corrections are very, very small. Yet, they can make a big difference in where the missle flies and lands.

    Why does such a small change make such a dramatic difference in the end? Because the direction has been changed. So the longer we go in that direction the greater the distance between where we are and where we would have been. Think of the missile example. Even a one degree change in course will make a huge difference after the missile goes a thousand miles or more.

    OK, so NASA can make a small change and affect the trajectory of a space shuttle, but is it true that we determine the trajectory of our life? We could debate it, but I'd argue that it's true. Our choices make a difference. Perhaps not a noticable difference at first, but one that will change where we end up in the future. It happens the exact same way as the missile. A minor course correction maintained over a long time can make a huge difference in where we end up.

    Let's consider a simple (and somewhat silly) example. Suppose that you're a 20 year old coming out of class. Feeling thirsty you search out a vending maching. Sodas (and bottled water) are $1. You reach in your pocket and pull out a single. Into the machine it goes. And, your thirst is quenched. As you walk away from the vending machine you notice a water fountain that you hadn't seen before. Oh, well. It's only a buck. 

    True, but did you know that if you put that single dollar to work earning interest it would be worth $46 when you were 70 years old and looking for retirement income? 

    Still not impressed, suppose that you bought that $1 drink every day for 50 years. Had you used the water fountain instead and saved the money you would have accumulated $209,000! Quite a difference in the trajectory.

    Obviously, that's a made up story. No one is going to go to a vending machine once a day, every day for 50 years. But, it does give you a feel for what happens when you routinely say "it's only a buck". Say it too often and you'll be adjusting your financial trajectory.

    Now let's take a look at the final part of the quote.  It talks about the decisions that we make when times are tough. I don't suppose that tough time decisions have any greater impact on our trajectory than any other decision. But they could be more important because we have a smaller margin for error. When you're right on the edge you don't need anything that would push your trajectory to a point where it spirals out of control (I can see them intentionally destroying a missile that's gone off course). 

    I guess that what I'm saying is that the stakes are higher when you're facing tough times. And, you're already under pressure, which might compromise your ability to make decisions. So it's important to move cautiously. Don't make decisions without thinking about how the choice might affect your future financial trajectory. 

    What do you think? Do the decisions you make in times of trouble make a difference in your trajectory? Send me an email or add a comment and let me know what you think.



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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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