Saturday, November 11, 2006
The Truth About Personal Financial Planning
One of my favorite Bloggers, Norma, sets out thirteen bits of advice with regard to creating a secure financial future for you and your family. It is well worth taking a look at. In fact, you may want to print it out and tape it to your bathroom mirror. Or you might prefer my list of 13.
1. Be born into a wealthy family. The older the money the better. Your parents and their siblings will, if they earn the wealth in their lifetime, tend to hang on to it until the pass away. By that time you are too old to really enjoy it. It is better if your grandparents' generation created the dough. It is best if they put the money into a trust that pays off a bunch in your 20's with the rest much later.
2. Marry money. If you are a guy, find a wife who is a Daddy's girl. It is way easier to get the down payment and other helps if Dad is trying to help out his favorite. If you are a woman, it is better to marry a guy who already has the money. Parents are far less inclined to give their money to their boys while they are young enough to earn it.
3. Marry a double pensioner. Or become a government employee sometime in your life. My folks taught me this one. I haven't done it yet, but I'm still thinking I might. If you get max Social Security, it is about $2700 a month now. You can live on that if you have to, but imagine if you were getting a teachers pension of even another $1000 or so. In most school districts you only have to work for 5 years to get that pension.
4. Never ever get divorced. Well, I suppose if you divorce one of those super rich folks, you could end up with potential future security. For the most part, divorce destroys the wealth of both parties. It is worse for the woman if her earning capacity is less. However, splitting assets works against both parties.
5. Don't have children unless you do #6. Some estimates are that each child will cost you $500,000 or more. If they go to an ivy league or top notch private college, they can cost that much in 5 years. The senior year of high school commonly costs more than the first year of college. Then there's the wedding!!
6. If you must have children, take a page from our forefathers. Breed them to be income producers. My 10 year-old is in his 6th year of piano lessons. I have asked his instructor to teach son Robert how to teach piano. By the time he is 12 I hope to have him earning $25 an hour or so ($50,000 a year) teaching other kids. At 18 he should be able to put himself through college.
7. If you must have kids, part II. Create a super money machine. Instead of piano, start them with boxing or golf lessons at 4. Have the child doggedly pursue this sport to the exclusion of much else in life. Then when they are a world champion, the first thing they will do with their millions is buy you a nice house, or a vacation home.
8. If you must have kids, part III. Become a talent manager. All kids are cute in their own way. There are many, many ways for them to become stars before they are even five. My neighbor's grandchild just hit pay dirt with a national retail chain. His picture is everywhere. He's 3. Yes, it is hard work for you, the parent. You have to drive them around to the auditions,
9. Choose your employment carefully when you are young. Only work for companies that are growing like crazy and that have a great stock plan. One of my uncles worked for IBM. A close friend worked for a major food maker. Both made more money on the stock then from their paycheck. Sure, you might pick an Enron, but you might pick the next Walmart.
10. Become a politician. This will help in many, many ways. First, many political jobs come with pensions. This might allow you to have two or three pensions. SS + a government pension from teaching or some such + a congressman's pension. This is called triple dipping.
In addition, you will have the income from the political post without giving up your day job. The door will also be open to paid speaking gigs, book publishing, and seats on boards of directors. All of this without having to resort to illegal activities.
11. Out earn your spending habits. Sure, I know that the "trusted" financial guru's all tell you to spend less than you earn. But what is the challenge in that? Become a big spender. Then you will be working extra hard to make sure you can make the payments.
12. Don't tithe or give to charity. If you care at all about keeping up with the neighbors and getting as many toys as they have, you can't give anything away. Sure, there is a nice tax advantage, but you're still going to be giving at least 70% real money after taxes. If you're making $100,000 a year and give 10%, that's $7000 per year after taxes. You can almost pay for two weeks in Hawaii with that. If you invest that $7000 in an IRA at 10% return, you will be a millionaire in no time.
13. Be lucky. Corollary - don't be unlucky. All of my sage advice can be turned to ruin if your child comes in 2nd in the national college tennis championships. There just isn't much money in being 2nd.