Archive for category Money
Which Takes Priority for You - Mortgage or Credit Card Bill?
Photo by Marco Bellucci
I read an article on CNNMoney that exposed a new trend among the debt-ridden: paying their credit card bill before their mortgage. You can read the original article by clicking the link:
Consumers paying credit card over mortgage
According to recent data, 6.6% of people are delinquent on their mortgage payments, but current on their credit cards. Only 3.6% were current on their mortgage and behind on their credit cards. Apparently it’s easier to walk away from a home with a declining equity stake than it is to fall behind on your favorite payment tool.
Mr. Bubble
The housing bubble is to blame for this turnabout. California and Florida have been the hardest hit, and the trend is even more pronounced in these states. In the Land of Arnold, 10.2% were late on their mortgages but current on the plastic, while only 2.7% were on the flipside. The Sunshine State had 12.4% behind on their house payment, with 3.9% in the reverse situation.
Avalanche of Debt
Maybe they’re using a half-assed version of the Dave Ramsey Debt Snowball method - paying off the smallest debt first. But I think they were supposed to at least make the minimum payment - which, in the case of a mortgage, is probably their largest payment. These people need to find a balance when it comes to debt repayment. If you’re in arrears on your mortgage payment, and relying on credit cards to pay your daily expenses, you’re probably just one straw away from breaking the camel’s back, so to speak.
I feel for these people. Thank God I’m not in the same situation, as I paid off my mortgage years ago. What do you think? Would you choose to pay your credit card bill before paying your mortgage? What’s Plan B when the bank forecloses on your house?
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The Office Super Bowl Pool
Super Bowl week usually includes the great tradition of the office pool. Rather than a straight bet with a point spread, this pool involves picking boxes. This draws even the non-football fan, as they can watch the big game with some interest, even when the commercials are over.
The Grid of Boxes
The pool involves a grid of boxes on a letter-sized piece of paper, usually printed landscape-style. Each box represents the last number in the score for a particular quarter. The sheet contains a total of 120 boxes laid out as shown below (click the image for a larger view):
As you can see, the grid is devoid of any numbers for the scores. The yellow boxes will represent the scores for the Saints, while the green boxes will represent the scores for the Colts. These scores will be picked after every white box has been selected by the pool participants.
Picking Your Boxes
The first step is finding out how much each box will cost you. The higher the cost of the box, the bigger the potential payout. It’s that risk vs. reward thing. It really doesn’t matter which box you pick, as the scores will be selected randomly after all of the boxes have been claimed. A rule of thumb that I use is to pick only one box per row and/or one box per column. That way, if I get stuck with a lousy score of 5, it only ruins one of my selections. Here’s what the sheet will look like when all of the boxes have been selected (click the image for a larger view):
Picking the Scores
The person who runs the pool will probably be the one who picks the random scores that will be used to fill in the yellow and green boxes. They will certainly do this under some sort of supervision, as the witnesses will verify that the choices were random, and thus fair. This can be done by putting pieces of paper numbered 0 through 9 in an envelope, and letting a neutral party pick them out one at a time for each specific box. I’ve seen people use two sets of numbers, with the team name also written on each slip of paper. Here’s what the sheet will look like after the scores have been picked (click the image for a larger view):
Sizing Up Your Chances of Winning
After the scores have been picked, you’ll receive a copy of the completed grid. Now, you can see if you’ve got any chance of winning some loot. Scores such as 3-0 and 7-0 are good for the end of the first quarter and first half. The zero can represent 0 or 10. If you get stuck with a 5 or an 8, you’d better hope for a high-scoring game.
The Payouts
Now we get to the important stuff. You’ve plunked down your cash, and wound up with some potentially good boxes. If you’re in a $10-a-box pool, the total payout will be $1,000 (100 boxes time $10 a piece). In a simple pool, you’d get a set payout for the score at the end of each quarter. For example, the payout schedule may look like this:
End of 1st Quarter: $100
Halftime: $200
End of 3rd Quarter: $300
Final Score: $400
So, if the score for the end of the 1st quarter is Saints 7, Colts 6, then Paulie would win $100:
If the final score is Colts 35, Saints 13, then Googs would win $400:
So, for Googs’ investment of $70 (7 boxes at $10 each), he pulled in $400, over a 500% return. While I don’t advocate gambling for everyone, it sure keeps up your interest in a lopsided game.
As this is a primer on boxes, I didn’t get into some of the more advanced concepts like instant wins, satellite boxes, or the difference between the 4th quarter score versus an overtime score (a rather remote possibility, but they did come within 1:08 in Super Bowl XXXVIII).
If you’re not a big football fan, I hope this little primer helped, especially if you’re not a crazy American like me. And even though the football Giants are sitting at home watching the game instead of playing in it, I’ll stay glued to the tube. I think I have a decent shot of bringing home some dough this Sunday, and you can bet that the beer will be cold. Good luck, and enjoy the game!
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Pay Cash or Put it on the Plastic?
Photo by Andres Rueda
Whew! Now that Christmas is over, so is Christmas spending. Unlike most personal finance bloggers, we don’t stick to a strict budget. We try to estimate our gift expenses based on the prior year, and factor it up by the amount of people we have to buy for. Our relatives and close friends receive the lion’s share of our gifts, and then there’s coworkers, the mailman, the garbage men, etc.
Do you take Diners Club?
Obviously, we don’t tip the garbage men with a credit card. But almost anywhere else that we’re able to, we use the plastic. I know, this is borderline heresy. What about my pro forma budget spreadsheet, and my careful projections of future expenses? Well, I’ve found that when the holidays roll around, emotion takes over, and all logic goes out the window. So, I’ve stopped trying to fight it. And that’s where the plastic comes in.
Extra points
Like many of you, I use a rewards credit card. I pay for groceries, gas, and even my cellphone bill with my rewards card. I’m very diligent about paying off the balance each month, so that I don’t incur any interest charges. The extra activity allows me to earn more rewards points, which I can trade in for merchandise or gift cards. It’s a win-win for me, because I don’t carry a balance.
Heresy!
I’m sure Dave Ramsey would throw up if he read this. I’ve been in debt in the past, and have abused credit cards, so this might seem like giving the keys to the methadone clinic to a drug addict. But I’m more disciplined now, and don’t see credit cards as instruments of evil. So, as long as I pay off my balance in January, if I go a little over my Christmas gift budget estimate, I’m not going to obsess about it and ruin my holiday. Consider it my slush fund.
How about you guys? Anybody else out there that throws the budget out the window at Christmastime? I know that I can’t be alone. The crowded stores are a dead giveaway.
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Getting the Most Out of Your Per Diem
Photo by kainet
I was on a business trip recently with other members of my “team”. When the subject of dinner came up, one of the members, who will remain nameless, suggested the Golden Arches. That’s right, McDonalds. He wanted to try to make money on the trip, and wanted to stretch his per diem to the max. I should have seen this coming, because shortly after we checked in at the hotel, he ducked into a conference room, looking for free food and drink.
Per Diem - the 50 Cent tour
Per diem is latin for “per day”. Different per diem rates are established for various cities of travel by the General Services Administration. Obviously, New York City will have a higher per diem rate than Albany. The per diem is supposed to cover your meal expenses, as your airline, rental car, and hotel are covered separately. Some companies may require you to use a corporate credit card to pay for the per diem-covered meals; my company is not that Draconian. Not yet, anyway.
Gaming Your Per Diem
So, for each night that you’re away on business travel, you’re entitled to per diem. Some people will try to stretch their return home so that they arrive just after midnight, in order to squeeze an extra day of per diem out of the company. I would be careful when pulling this trick. If your plane lands at the airport at 8:00 pm, and the ride home from the airport is a half an hour, you might raise some eyebrows when you submit your expense report. Is it worth risking your reputation, and maybe your job, for an extra 50 bucks?
OK, break it up!
Some companies break the per diem up into breakfast, lunch, and dinner. So, if you arrive in the evening at your destination, you’re entitled to the dinner allowance only. If the company that you’re visiting provides you with lunch, you don’t get paid your lunch allowance. Again, many people try to slip this past the expense report people. Again, I wouldn’t risk my job for a lunch allowance. And if you’re required to charge your meals to your corporate card, you don’t have a snowball’s chance in hell in getting away with this trick.
I’m not on the guest list? There must be some mistake…
So, how do you maximize your per diem, legally? Many hotels offer coffee and/or continental breakfasts to their guests. These are undocumented on your hotel bill, and should not raise the eyebrows of the expense weenies. You could follow my colleague’s lead, and wander into cocktail receptions hosted by other companies in your hotel. He claims that he’s done this numerous times, and claims it’s a “networking” exercise. Yeah, right. He’s really after refreshments rather than new contacts.
“Meal money in Triple-A is $7.50 a day. In the big leagues it’s $15. I don’t know if they mean to have you eat half as much or half as well.” -Jim Bouton in Ball Four
So, to legally maximize your per diem, I would stick to lower-cost restaurants that provide quality food. Or, bring along a few protein bars, and avoid eating breakfast out. You’ll be eating healthier, passing up the starchy corn muffins and pancakes. Your waistline will thank you for it.
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Sandbagging Your Personal Budget
Photo by 8zil
sand·bag (s
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One of the program managers that I work with likes to hedge his bets by painting a bleaker picture than he should, in order to easily “make his numbers”. He’s a sandbagger extraordinaire, and I marvel at how he gets away with it. He’ll forecast his sales with a three-month slip in deliveries, even though he knows that he’s bound to the contractual dates. He pads his cost estimates on projects, never projecting any savings until the project is over. He should have theme music playing when he walks to the podium, maybe Led Zeppelin’s “When the Levee Breaks”. The accountants hate him, and I always take his forecasts with a grain of salt. In his world, the buzzards are always circling overhead, and there is no upside. He errs on the side of caution. If he ever loses his job, there’s a levee somewhere that could use his expertise.
Uhh, where did I put those sandbags?
Actually, he may have a point. What if we apply this concept to our personal budgets? You know, when we project next year’s expenses. Wait, you mean you haven’t done that yet? I’ve already forecasted two years into the future. Maybe I’m overzealous, but I like to have my path laid out in front of me. If you’d like, you can use the budget file that I created in Excel that I talked about in this post: Low Budget.
Time to fill them up
My point is, leaving a little breathing room in your budget is a good thing. The extra padding that you add to your expenses will cover the little things that we never budget for. I can think of several examples of unexpected expenses, such as:
- School pictures;
- Magazine subscriptions that you forgot about renewing;
- Fees for school field trips;
- Girl Scout cookie drives at work.
So, how exactly do we accomplish this? I like to look back at my expenses from year to year. I’ll calculate the escalation in cost as a percent, and add that to the latest expense amount for that budget item. For example, let’s look at car insurance. I’ll look back at my last three years, and come up with an average growth rate in the premiums:
Car Insurance Premiums
- 2006: $2,000
- 2007: $2,100, a 5% growth
- 2008: $2,400, a 14.3% growth
- 2009: $2,500, a 4.2% growth
I can take the average growth for the period in question, and add that to the current year’s expense to come up with a number for next year. In this case, I can just take the increases by year and divide by three. That would give me 7.8%. If I wanted to get technical, I could take the $500 increase and divide it by three, and then divide the answer by 2,000, which would give me 8.3%. Whatever. I’ll round it to 8%. It’s close enough for a projection. That would compute to a $200 increase over the current premium. Now, I’ll sandbag it by adding another 2%, or $50. In total, I’ll add 10% onto this year’s premium, or $250. The extra fifty bucks will either go in my pocket, or pay for some other middling expense that I forgot to budget for. I’ll use this process for any expense item that varies from year to year. Any items with fixed payment amounts, like a car loan, wouldn’t get any padding.
By sandbagging your expenses, you’ll create a cushion in your budget for any unexpected items that arise. And you won’t feel like a cheapskate when Girl Scout cookie season starts at work.
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The Trojan Horse of Purchased Vacation
Photo by quaziefoto
It’s signup time for our annual benefits elections at work, and one of the options that we have is the ability to “purchase” additional vacation time. What this means is that you can elect to have the company deduct from your paycheck the cost of this additional time off. A percentage of the vacation cost is deducted each week from your paycheck, on a pre-tax basis, because it’s wages that you are voluntarily forfeiting. It’s treated the same way tax-wise as your 401(k) contribution.
How it works
For instance, if you make $25 per hour, and would like an extra week’s vacation for next year, the company will multiply the $25 times 40 hours to arrive at $1,000. The $1,000 will be divided by the number of weeks, 52, to arrive at a weekly deduction of $19.23. Therefor, your weekly gross pay would be reduced by $19.23, resulting in $980.77, and lowering your gross wages for the year by $1,000.
Vacate now, pay later
You get to use this purchased vacation just like good-old regular vacation. It gets added to your vacation “bank” on January 1st, so you get to use it right away, while you spread your “payments” out over the remainder of the year. You could burn the entire 40 hours in January on an island vacation, and not make your last “payment” until December. Sounds like a sweet deal, doesn’t it?
A public relations coup
Why does the company offer this benefit? You could say that the company values healthy, rested, stress-free workers. But I’m a realist, and see the financial benefit to the company. You are, in effect, signing up for a voluntary furlough. The company will save a week’s pay, albeit spread out over the entire year. Multiply that by hundreds, if not thousands of employees who opt for the same deal, and voilà! The company has improved its cash flow without inflicting any pain. In fact, the company looks like a benevolent Big Brother, because it has given the employees the illusion of a benefit, improving corporate goodwill, while reducing your annual pay. The employees think that they’re getting something for nothing. Just like the Trojan Horse (or, if you’re a Monty Python fan, the Trojan Rabbit). This is genius, I tell you!
Low man on the totem pole
Of course, most of the people that purchase vacation are probably newer, recently-hired employees, the low people on the totem pole, with little accrued time in their vacation banks. For them, this looks like a good deal. And by THEM, I mean ME, since I frequently change jobs, and many times can be considered a new employee. But in my case, I also get a week’s worth of personal time, and two weeks’ worth of sick time. That’s 6 weeks, counting my 3 weeks’ worth of regular vacation. And I didn’t even include the 10 paid holidays that I get each year. If I’m out more than 6 weeks in a year, I probably should start looking for a new job, because I live in America, land of never-ending work. Companies are more liberal with vacation time in other countries, like Lithuania and Brazil, where a minimum of 4 weeks vacation is mandated by law.
Trojan Horse
I’m not saying that you shouldn’t purchase vacation; you might have a valid reason for needing the extra time off. I’m just saying that you should weigh the advantages (extra time off) against the disadvantages (less money in your pocket) before jumping on the bandwagon with the other lemmings. You may feel it’s a gift from your company, while it’s really a Trojan Horse to your personal finances. You’re really signing up for a pay cut. I’m not falling for it, and like the French castle defenders in Monty Python and the Holy Grail, I’m flinging the Trojan Rabbit right back at them.
How about you? Are you planning on purchasing any vacation from your employer next year? Do you think it’s a good idea, and that I’m wrong? Let me know in the comments.
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Credit Card Interest: The Terminator
Photo by southtyrolean
“Listen, and understand. That terminator is out there. It can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead.”
- Kyle Reese, from The Terminator
Just replace “terminator” with “interest” and we can apply Kyle Reese’s statement to credit card debt. I guess Reese never owned a credit card. Good for him. All he had to worry about were Terminators. He had it easy. For those of you saddled with credit card debt, I sympathize. I once walked among you. But I escaped from the nightmare world of never-sleeping interest, and so can you.
The Citi never sleeps
There used to be a commercial in the 1970’s, where the tagline was “the Citi never sleeps.” It was a commercial for Citibank, a subsidiary of Citigroup, who I’m sure you’re familiar with if you carry credit cards. The slogan sounds quite insidious, don’t you think? They should change the slogan to “the accumulating interest never sleeps”, but while it’s more accurate, it’s much less catchy. An even better slogan would be “the debtor loses sleep”, because that’s what happened to me when I carried credit card debt. I’m sure my story is similar to many of you out there.
It started with the house
After buying our first house, my wife and I got caught in a cycle of growing credit card debt. We used as much of our savings as possible for a down payment. While this lowered the amount we borrowed on our mortgage, it left us with little cushion for any unexpected expenses. Those of you who have older houses know all about those. Between home improvements and car repairs, we racked up quite a bit of credit card debt in a short period of time. The Terminator went to work while we slept.
A few miserable years
After taking stock of what we owed, we proceeded to develop a debt repayment plan. We took a hard look at our monthly expenses, and made the necessary cuts to lower our spending. Then we did a calculation of how long it would take to pay off all of our credit cards. After our jaws hit the floor, we recalculated, and came up with the same result. With the cuts to our entertainment budget, we were in for a few trying years. It was our first strike back at the Terminator.
Things start to look up
First, we stopped using credit cards, cold turkey. We threw every extra dollar that was left over at our debt. Every raise was sent to Citigroup, or MasterCard, or Sears. Any windfall that came our way went to knocking down the principal. We were using a debt snowball before I ever heard of Dave Ramsey. Finally, after years of poor raises, I scored a job that offered a significant jump in salary, and we started to make some headway into our debt repayment. The Terminator was on the ropes!
On a roll
We stuck to our plan, and eliminated our credit card debt. We took the extra cash flow and started to chip away at our mortgage. After several years of additional sacrifice, we were mortgage-free. Let me tell you, it’s nice to have a positive cash flow. SkyNet had been defeated!
Now that I’m older and wiser, here’s some advice to prevent you from going into debt:
Wait to buy your first house - renting isn’t “throwing money away”, as many will have you believe. We could have stuck it out in our apartment for a couple more years, and saved more money in the meantime.
Start an emergency fund before you buy a house - trust me, as soon as you put the key in the door, something will require fixing. Plan ahead. Don’t put your repairs on your credit card.
Set up a budget before you get your mortgage - set your own limits now, before you get too accustomed to just winging it.
Don’t put down every cent that you have - while it’s nice to have a smaller mortgage, don’t hamstring yourself by leaving no liquid cash. Keep something on the side.
Pay cash - at least until you’re sure that you have the discipline to pay off your credit card balance every month.
But, if you’ve already got the Terminator on your back, here’s what worked for me. I warn you, this will be painful:
Stop using the credit cards - I know, duh, so obvious. But you’d be surprised how easy it is to use the cards “just one more time.” Stick them in the freezer if you have to. I told you this would be painful.
Make a budget - it doesn’t have to be an elaborate one, either. Find a format that works for you, and get cracking. You can find mine in this post. You’ll be surprised where all of your money goes. Ignorance is not bliss when it comes to personal finance.
Start an emergency fund - start putting some money away. How much is up to you. I’d recommend doing an analysis of any potential short-term risks, such as car repairs, home repairs, or medical expenses, and save accordingly.
Use the debt snowball - this is the Dave Ramsey method. From your budget, you’ll be able to determine how much you can throw at your debt each month. This is your monthly debt allotment. Pay the minimum on all of you cards except the one with the smallest balance. Add up the total of these minimum payments. Then, subtract that number from your monthly debt allotment, to determine the amount to be paid to the smallest card’s balance. Pay this amount on the smallest-balance card. This strategy ensures that you’ll be paying off more principal, and help you eliminate one debt at a time. It keeps the momentum going, and gives you a short-term goal to shoot for.
Or, use another method - some argue that Dave Ramsey’s method doesn’t take into account the difference in interest rates. I’m one of them. I prefer to pay the minimum on all of the cards except the one with the highest interest rate. Then, pay the remainder against this card’s balance. You’ll be knocking down the balance on the card with the highest debt. It may delay your gratification of paying off a card, but will lower your interest payments in the long run.
Throw any “found money” at your debt - if you get a raise, don’t grow your lifestyle, put it toward your debt instead.
Don’t neglect your investments - continue to invest in your company’s 401(k) plan. Contribute enough to get matching contributions from your employer. When your debt is paid off, you can shoot for fully-funding your 401(k).
Pay off your mortgage - I know that right now, this appears to be a far-off pipedream. But if you stick to the plan, you’ll be able to pay off your mortgage eventually, and say Hasta la vista to the Terminator.
For those of you interested in Dave Ramsey’s method, click on the picture for his book:
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A Game of Inches
Photo by Mulad
“Annual income twenty pounds, annual expenditure nineteen pounds and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
- Mr. Micawber, from David Copperfield
There is a narrow margin between victory and defeat; between joy and misery; between savings and debt. Look at any sport. A one-point difference made the Giants the winners of Super Bowl XXV, while the Bills suffered the first of four Super Bowl losses. Such a narrow margin. If Scott Norwood’s kick hadn’t gone wide right, who knows what would have happened? The Bills may have started a winning streak instead.
Narrow Margin
Branch Rickey said baseball is a game of inches. Just look at the ground ball that went through Bill Buckner’s legs in the 1986 World Series, or Derek Jeter’s home run that a fan snagged from Tony Tarasco in the 1996 playoffs. The same can be said of personal finance. Spend a little more than you earn, and you’re going to owe someone. But cut back just a little, and you can stick that savings in the bank. It’s important to be the one with the extra cash, because you’ll be earning interest, instead of owing it. Like in baseball, you should start accumulating savings in the early innings, so that you can cruise later on in the game.
Moving the chains
But enough with the baseball metaphors. Let’s move on to football! In order to get a first down in football, you need to gain ten yards. This moves the chains, and gets you closer to the end zone, which is the ultimate goal. Gain a little on each play, and keep moving forward (savings). Lose yardage due to a sack, and you move backward (debt). If you gain more than you lose, you should move down the field to the end zone (financial independence). But the path to financial independence is different from scoring a touchdown, because there’s one element missing in football: Interest.
Interest
Ah, the magic of compound interest. If you gain 5 yards in football, the referee isn’t going to tack on any extra yards. That’s the one advantage of savings: someone will pay you for holding your money. It’s also the big disadvantage of being in debt, as you have to pay someone else to use their money:
Interest [on debt] never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours. … Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.
- J. Reuben Clark Jr. in Conference Report, Apr. 1938:103.
So, let’s win this game of inches. Spend less than you earn. Keep moving those chains toward the end zone. Choose happiness over misery.
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The Broken Windows Theory
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I recently read an entry by Chris Guillebeau on the Art of Nonconformity blog entitled Business, Blogging, and Broken Windows. I’m subscribed to Chris’ blog, and I enjoy his views about unconventional living. In the post, he talks about the potential “broken windows” for an online business. For those unfamiliar with the Broken Windows Theory, it was first mentioned in an article in the Atlantic Monthly. Here’s an excerpt:
Consider a building with a few broken windows. If the windows are not repaired, the tendency is for vandals to break a few more windows. Eventually, they may even break into the building, and if it’s unoccupied, perhaps become squatters or light fires inside.
Or consider a sidewalk. Some litter accumulates. Soon, more litter accumulates. Eventually, people even start leaving bags of trash from take-out restaurants there or breaking into cars.
Broken Windows in our financial lives
Broken windows can either be repaired quickly, or they can turn into lost causes. If neglected, more broken windows appear, leading to complete ruin. After reading the post, I though about the potential “broken windows” in our financial lives. These would be the bad habits that we get into. I started to compile a list in my head, based on what happened to a close friend of mine:
Broken Window #1 - You neglect to save any money for your emergency fund.
Broken Window #2 - Your car breaks down, and you charge the repair to your credit card, because you have no emergency fund.
Broken Window #3 - You pay only the minimum payment to your credit card, resulting in a finance charge being assessed for the outstanding balance.
Broken Window #4 - You lose your job. You have no cushion in the bank, and can’t pay the minimum on your credit card. Your credit card company assesses a late fee in addition to the finance charge.
Broken Window #5 - You finally get another job. You save enough money for a down payment on a house, but your spotty credit history due to missed payments counts against you. Don’t worry, you can still qualify for a subprime mortgage.
Broken Window #6 - The economy is in a shambles, and you lose your job. Because of the housing bubble, your house value plummets, and you’re underwater on your mortgage.
Broken Window #7 - Your home is foreclosed, and you move in with your daughter. Your financial life is in a shambles, just like the run-down building in the theory. Only this is really happening. If only you would have fixed that first broken window…
Don’t let small problems grow into big ones. Fix what needs to be fixed. A little inconvenience now will save you a lot of heartache later on.
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The Time Machine
Yesterday was H.G. Wells’ birthday. I’ve always enjoyed his science fiction stories, especially The Time Machine. It’s tempting to want a do-over, just like when we were kids. I don’t know about you, but there are several decisions that I’ve made in my life that I’d like to have back.
My 401(k) - I would have fully funded it at a younger age. This way, I would have lost even more when the market tanked last year. Just kidding. But knowing the time value of money, and the magic of compound interest, this one is a no-brainer.
Market Timing - Now, if I had known the day the market was going to tank, I’d have pulled my money out. A guy I work with did just that, and he’s not complaining about his retirement losses. He’s over 60, so he had to be more cautious than someone my age. But given the difficulty in predicting the market, my investment in index funds seemed prudent at the time.
My house - We bought our house about a year after we were married. It was tough making the payments, even with two salaries. We also decimated our 401(k)s for the down payment, which set our retirement savings way back. Given a do-over, I’d hop in the Wayback Machine with Mr. Peabody and tell my younger self to wait a few years before buying a house.
My career - I’ve held many jobs at several companies, but I think that I would have taken even more chances when I was younger and had no kids. Having responsibility tempers your risk-taking, and I should have swung for the fences when I was in my twenties. I’ll still take calculated risks, but I can’t be as brash as a recent college grad. There’s more to lose now than back then.
My health - I would have taken better care of myself, and not let myself slide into these ruts where I overeat and stop exercising. This starts a never ending cycle of gaining and losing weight. Very inefficient, compared to maintaining an even keel. Put down that donut, fatso, and hit the treadmill!
My purchases - I would have skipped a couple of vacations, fewer electronic gadgets, and brown-bagged it to work more often than I did. Even if I banked only a fraction of what I spent on these things, it would make a big difference in my savings.
If you had access to a time machine, what would you go back in time to change? What advice would you give to your younger self?
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