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A Reader Question: Help This Nurse Please!

Friday, September 3rd, 2010

A Nurses Financial Question:

A nurse reader emailed me recently with a question.  They had a buyer for their home, and wanted to know what to do with the money that would be coming in.  They are concerned about the current economy, and wanted to know the safest place to put the money.

Of course, I was ready to pounce.

My Initial Financial Suggestions:

  • Make sure you pay off your credit cards, your car.
  • Make sure you are careful when purchasing your next home to get a good buy.  Put at least 20 % down and finance for no more than 15 years……
  • Make sure you have life, and health insurance, and are building a college fund if needed…..The usual stuff!!!

The Nurses reply:

Well didn’t I feel like a fool when the reply came in:

  • They live in another PAID FOR home.  They have another rental property, PAID FOR!
  • They have no credit card or car debt, or any other consumer loan.
  • They own land with planted pines-PAID FOR!
  • They have a lake home- bought when a friend was going under- at a great price.  They have a small mortgage on it.  The mortgage is being taken care of by renting the lake home and their other rental.
  • They are not fully funding their 403b, or IRA’s. (finally, something I could work on!)
  • Kids are grown and on their own.

I wrote back-“What the hell do you need me for-you need to be writing The Millionaire Nurse Blog!”

This couple both work in the health care field, her husband is in allied health as well-so we aren’t talking about huge salaries.  They just live conservatively.    And invest their money in what they can see, and understand.

This is exactly what I am trying to teach.  Anyone can become “wealthy” by today’s standards, if they take the time to have a plan.  Put money aside month by month, and let the money grow.

Dr Dean’s Recommendations:

Now I certainly had  further advice for them, in the “for what it is worth” department:

  • Develop a more formal plan for their money-know where it is going before they get it.
  • Use their 403b’s to gain the match from their employer.
  • Know where their IRA’s fit regarding their overall investments. Not just forgotten.
  • Diversify:  Someone who has most of their net worth tied up in real estate, needs to make sure their other investments, in their IRA or 403b,  aren’t in a mutual fund,  heavily invested in real estate.
  • Make sure they have an estate plan, with a will and durable power of attorney.
  • Make sure they have identity theft protection.
  • Make sure the rates they are paying for insurance are competitive.

In short, make sure they are covering the small details, before they become big problems.

Reader Questions:

I also offered to put their situation out here, on the world wide web-so other financial experts can help me make suggestions.

Anything I have left off?  What do you think?

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Posted in personal finance | No Comments »

Divorce: In This New Economic Reality!

Monday, August 30th, 2010

Divorce

Unfortunately, divorce is a common cause of financial problems.  And, of course,  financial problems are a common cause of divorce.

An article in the WSJ describes efforts to decrease the cost of divorce in an economy that has affected all aspects of our lives.

Couple fighting photo by v.peckham c.c.

The Current Economy and Divorce

How has the recent financial downturn affected the economics of divorce?

  • The most valuable asset in many households is their home.  With home values plummeting-how do you deal with it?  In the old days-sell the home, pay off the note, and divide the proceeds.  How can you do this, with many homes upside down, and with the sale of the home nearly impossible in this environment?
  • The other most valuable asset, retirement and investment accounts.  The value of many of those accounts has dropped by 30% by many measures.
  • Debts in the marriage-how to decide who owes which debt, is increasingly complicated.
  • Record high unemployment-how can you pay child support, when you are out of work.
  • Attorney’s fees have increased faster than inflation, making divorce much more expensive-average divorce costs in the US-$ 15-20,000.00.

Divorce Alternatives

What are the alternatives in this heartbreaking scenario?

  • Stay together-divorce rates typically drop, in an economic downturn-couples can’t afford to divorce-so they either stay together longer, or separate, but don’t file.
  • Do-it yourself divorce-There are many do-it yourself divorce kits.  The couple sits down with the templates, work out an agreement on all the issues, take it to court where it is filed.  In some cases this can drop the cost to less than $1,000.  The laws vary widely state to state-make sure you pay attention.
  • Mediation-This article gives 10 reasons to use a divorce mediator-if do-it-yourself is not an option-as issues can’t be agreed upon-or things are too complex, this route may be worth exploring.
  • Collaborative Divorce-This more formal route, involves attorneys, psychologists, and other professionals, coming up with a plan that both sides agree on.
  • Divorce court-obviously the most expensive-this is the route chosen by those couples who basically now despise each other, and want to do the most damage possible.  Usually the only winners here are the lawyers.

Divorce Precautions

What are a few precautions recommended by experts, especially if you are going to try to do-it-yourself?

  • Don’t forget health insurance costs-many who have been used to employer provided plans-aren’t eligible once they divorce the spouse with the health plan-and even though Cobra laws insure you can get health insurance-the cost is prohibitive for some.
  • Debts-make sure your name is not still on credit cards you are supposedly not required to pay, or that your name doesn’t remain on any other notes outstanding.  If your ex doesn’t make the payments-the creditors will not care about the divorce papers-they will hound you for payment.
  • Don’t make too many concessions-just because you want out.  You will have bills to pay, kids to raise, and a significant cut in that family income you became accustomed.
  • For many, a significant lifestyle adjustment is necessary-don’t live on credit cards cause you have “champagne” tastes, on your new “wine-cooler” income.

And finally the cheapest way to save money on divorce-is just like with many illnesses-PREVENTION!!!!

  • Premarital counseling-remember lust does not last!
  • Intra-marital counseling-don’t let small problems become huge ones.
  • Financial stability-living beyond your families means will catch up-causing unnecessary stress.
  • Keep love alive-spend quality time with each other.  Date night, learning to compromise, and having a short memory for perceived slights will go far!

No amount of trying can keep all marriages intact.  But before you break the tie that binds, make sure you check your emotions-and think clearly.  And have a close friend, minister,  or a family member support you along the way-to keep from doing something stupid!

Reader Questions

Have you been through a divorce?

How did it affect your finances?

Any tips for those who are beginning the process-things you did wrong, or right?

Help your fellow nurses and comment here.

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Posted in Quality of Life, personal finance | 10 Comments »

Bonds: In A Bubble? Should You Care?

Saturday, August 28th, 2010

Bonds and Bubbles

Bonds have been in the news lately.  The concern by the Wall Street talking heads, is that the bond market is in a bubble.  What is a bubble?

  • No it’s not a bubble, like we used to blow with our little bottles of soap and the rings that came with it.
  • And no, it’s not a bubble, like we blow with our baseball card bubble gum, or the big red ball of gum, that keep the dentist in BMW’s.
  • And no, its not the bubbles, that tickles our nose when we are drinking cheap champagne on New Year’s Eve.

    Bubble Monster by audi_inspiration(C.C.)

This kind of bubble, is the kind that bursts when we invest our hard-earned dollar, or even worse, our borrowed dollar on the stock or bond market.  Following the herd, the can’t miss recommendation of our brother-in-law.

Then POP, the bubble bursts, along with our dreams of making a killing!

Again-the bubble bursting is the noise we hear, when our investment crashes to the floor, or worse, the basement, or even worse to floors of hell!

Now that you understand bubbles, now lets discuss the bond’s that may or may not be floating, up, up, up-waiting on the guy with the needle, with a grin on his face, waiting for just the right moment-to bring it all crashing down.

Types of Bonds

I recently wrote, a very serious article, about how a company sells bonds to  raise money to build a new factory.

Bonds, however, come in several types, with the post I linked to above discussing corporate bonds.

US Government Bonds

But the most common bonds sold, are  US government bonds.  These are sold at auction by the US government, to raise (borrow) money to pay for its bills.  Otherwise known as the US debt.  And as we have discussed in earlier posts, the US debt is growing at a record rapid pace.

Where does the bubble come in with bonds?  Well, with all the turmoil recently with concerns about a double dip recession, and another world economic downturn-the professional investors are piling into the guaranteed return of the US government bonds.

Another reason, is the fear of the stock market-money has to be invested somewhere, and if not stocks, that leaves bonds for many investors.

The more investors bidding for the bonds, the lower the interest rate.  The interest rate on US Bonds are at 30 plus year lows.

Why you, a nurse should care about Bonds:

But the bigger question you may have is, “Why should I, a nurse working a 12 hour shift care?” I am just working to feed the family, and helping others.

The reason you should care, is that the interest rate paid on these bonds, is reflected in, or has an impact on, just about every other part of the economy, and your money.

It affects:

  • mortgage rates
  • the success of your 401k or 403b, if any of your money is invested in bonds-and most of you have a portion of your money in bonds-whether you know it or not-if you invest in one of those retirement accounts at work.
  • the rates you pay, when you borrow money for a car, truck, boat, etc.
  • the rates you get paid in your savings or interest bearing checking account.

So the government bond interest rate yield has an affect on all of us.  And bubbles are usually not a good thing, in any part of the financial world, because they are followed by a lot of pain, when the bubble bursts.

I will discuss and explain government bond investing further in another post.  Whether you should buy bonds, or bond mutual funds, in your retirement accounts, 401-k or in your own investment accounts.

Reader Questions

What do you think?  Are we in a bond bubble, does the interest rate you are paying or are being paid, matter to you right now?

What are your questions about the bond market, and all this government debt?

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Posted in Uncategorized, personal finance | 5 Comments »

HOW SMART, IS A SMART-PHONE?

Friday, August 20th, 2010

guest post by fdl

HOW SMART IS A SMART PHONE?

FINANCIALLY SPEAKING, OF COURSE

How do you make such life altering decisions?

  • Do you decide how much it will cost per month and evaluate how much easier your life would be if you had all those cool features?
  • Do you walk into a local electronic shop, fall to your knees and say, “Make my day, damn the cost’?
  • Do you decide to take the leap because your phone is at the end of its contract and you have to make a change anyway?  You’ve upgraded every other time your contract ended, paying more each time.  Why not now?
  • Do you need to get the latest in electronic devices-always.

Here I am, still undecided.  How much do they really cost per month?  According to a 2009 article by Mark Sullivan in PC World, the Apple iPhone is top of the line expensive.   The veteran writer examined the two year cost, the average contract length for a wireless device, of eight of the most popular Smartphone’s.

Using a chart, he gives the monthly charge plus the total cost over a two year period of these popular Smartphones.  Interestingly, all the phones come in at around $3,800 over the two years or monthly for around $150.  Two of the phones were less expensive.  The HTC-61 and the Palm-pre come out a bit cheaper overall.

Would I be cool or just a fool?

But, honestly, do you need this extra expense?   Will it really make your day better?  Will it save valuable time?  No doubt you’ll look totally cool.   Picture it.  There you are.  Sitting on the train, or at your desk, or in the break room, glassy eyed, staring into your palm where rests a tiny gadget delivering awesome information.

I know someone who doesn’t even have an email address or ever surfs the web-but that little Smartphone trinket soaks him for $150 bucks a month.  I know someone else who uses his Smartphone constantly. He checks his numerous emails, tweets, phones business associates, utilizes the GPS feature and generally ‘stays connected’.  It costs him the same $150 bucks a month, minimum.

So, where would you or I fall in our use of this terrific little money sponge?  Come on, do you really need that extra expense?

I Don’t Need A Smart-phone

All this discussion and my previous research on the topic convinced me that at this time, I am paying enough for my cell service.  I don’t need continuous internet, or GPS, or…well the list goes on.  I would look so cool staring intently into my hand, fingers curled, eyes glazed over, not hearing anything going on around me.

But, that will just have to be later on, like next year, when my ship comes in and I have money to throw away.

Not now.

Stay cool,

FDL

FDL writes about clutter and organization at The Fast DECLUTTER Blog

What are your thoughts-are any of you still in the dark ages with just a cell phone?

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Posted in personal finance | 7 Comments »

Monday Morning Reads-Man Measurement to True Debt Confessions!

Monday, July 19th, 2010

I don’t know why, but sometimes the stars, moon, and sun line up and many great bloggers, have outdone themselves with fun/heartbreaking/make you think posts.

So let’s get started.

Personal Finance:

Mrs Frugal at “Cool to be Frugal” writes on ways to improve your savings-great tips-especially the one on naming the savings account with its goal.

Foreigner’s Finances, Austin writes on the pro’s and con’s on online banking/vs brick and mortar banks.

Len Penzo, let’s the big-spenders with small man parts have it-read it and laugh-I did!

Red, at “The Girl With the Red Balloon, has true confession about why she is in debt, and what she woulda, coulda done different!  Please read this if you are borrowing money for college.

The Ultimate Money Blog, has the Yakezie personal finance bloggers carnival this week-check it out!

Home Management/Lifestyle Hacks

The Saved Quarter has written about de-cluttering the hall closet.  Simplify/simplify/simplify does make life calmer!

Speaking of Clutter, The Fast Declutter Blog, has tips on organizing-to keep from forgetting-uhhh, what was I saying???

Mighty Bargain Hunter writes about tipping! As the father of a former server-hear-hear!

Blogging Info:

Kikolani has this post about the new Digg-I was just getting a handle on the old Digg.  I have been added to the beta testing group-known as Digg alpha v4 (wuwt)-so let me know if you are also in the new-Digg-so we can Digg each other….

Kristi also has an article about “comment luv” and other marketing strategies at Famous Bloggers-great info to help with your blog.

And check out this post of 100 writing tips from top bloggers.

Enjoy the reads, and have a great week!

Posted in Quality of Life, personal finance | 1 Comment »

Take This Short Personal Finance Quiz: I DARE YOU!

Wednesday, June 23rd, 2010

Personal Finance Knowledge

You think you understand personal finance, right.  You only read this blog to laugh at my errors, and conclusions.

Or do you admit you need help, and read The Millionaire Nurse Blog to try to improve your knowledge?

Why don’t we take a quick 5 question quiz and see how you do.  It will only take a minute-even a fifth grader can do it?

The answers are at the bottom-but please, no cheating!!!

Taking a Quiz photo by Casey Serin

1- Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how
much do you think you would have in the account if you left the money to grow?
a) More than $102

b) Exactly $102

c) Less than $102

2-Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year.
After 1 year, how much would you be able to buy with the money in this account?

a) More than today

b)Exactly the same

c) Less than today

3-If interest rates rise, what will typically happen to bond prices?
a) They will rise

b) They will fall

c) They will stay the same

d) There is no relationship between bond prices and the interest rate

4- A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the
total interest paid over the life of the loan will be less.

a) True

b) False

5-  Buying a single company’s stock usually provides a safer return than a stock mutual fund.
a) True

b) False

Personal Finance Quiz Origin

I can’t take credit for making up these questions.  They were part of a survey done by FINRA Investor Education Foundation. This organization was founded using funds from a large fine by the SEC and others in 2003 against 10 of the largest brokerage firms at the time for alleged  conflict of interest violations.

A pdf file of FINRA Investor Education Foundation survey summary can be found here.

Here are some of the findings of the FIRA IEF survey:

  • 51% of those surveyed had no rainy day or emergency funds.
  • 12% of those surveyed have no checking and 28% have no savings accounts. (Un-banked is the buzz word here.)
  • 23% of those surveyed had used what would be considered alternative (high interest/fees) form of borrowing, including payday loans, pawn shops, rent to own, and tax-refund loans.
  • 41% of young people paid only the minimum payment on their credit card.
  • 42% of those surveyed had not done any planning on the amount of funds they would need to support themselves in retirement.
  • Young people and minorities had less knowledge of personal finance and the mathematical skills to do basic personal finance decision making, than their self-described abilities/knowledge.

How did you do on the quiz?

Answers:

1) a More than $102

2) c Your money will have less buying power if inflation goes up higher than your rate of return.

3) b The value of bonds goes down when interest rates go up-I will do a personal finance 101 post on bonds soon-I know you can’t wait!!!

4) a The lifetime interest on a 15 year mortgage is much less than on a 30 year, usually tens of thousands less (depending on the mortgage size of course).

5) b Single stock investing is considered much riskier than mutual fund investing.  See this previous post about single stock investing HERE.

I hope you didn’t embarrass yourself.  But if you missed any questions, that just means I have Blog Security!  A reason to keep writing and teaching.

One of the main results of the survey is the knowledge that continued efforts to teach the public about personal finance is desperately needed.

An article in the WSJ discusses efforts by Uncle Sam to assist with personal finance education.  One of  Uncle Sam’s efforts at the Department of Labor can be seen in this link here.  This article gives information on 401-k investing and fee structure, and why it is important.

Go to the site, and see if you can make yourself read to the end of the article.  I think this kind of competition will keep us personal finance bloggers in business for years, as we try to make learning this stuff more digestible, in bite sized pieces, and hopefully a little more fun! (if learning about 401-ks can be fun!)

Reader Questions:

  • How did you score?
  • Do you think the government’s efforts to help spread the word on the need for personal finance education will be successful?
  • Do you have any hints or tips?

If so I will call my congressman and let him know…..

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Posted in personal finance | 6 Comments »

Happy Father’s Day, From One Proud Dad To You!

Sunday, June 20th, 2010

Happy Father’s Day

Happy Father's Day-Photo by Kissimmee- The Heart of Florida

This is a great day.  Both of my children have checked in.  My wife and I have had a blessed day at the house after much recent travel.

It is a little warm, but we do live in Georgia…..

Here is a list of a few posts that I enjoyed this week!

Wealth Informatics gives a great review of travel tips-the registration to get the difference if your airline fare drops is worth the time to read!

The Wealth Artisan, gives a review of great inexpensive ways to spend time with your family.  Great reminder on Father’s Day!

Digging Out From Our Mess, has written a poignant story of how money problems cause marital problems-a great reminder!

Single Guy Money discusses buying a new car.  My regular readers know my feeling about buying cars-check this post from the past!

For a great recipe using your grill and fresh vegetables read this post from Family Balance Sheet! Delicious….

Don’t stop, here are a few more great reads!

Watson Inc discusses the chances of our economy crashing-I try to be optimistic, but…..

Peak Personal Finance has tips on making banking chores easier-always a great idea.  The less you have to think the better.

Baseball and life advice-always a good combo by CJ Bowker!

Redeeming Riches riffs on why more money without a plan is worthless-ask all those broke lottery winners.

Enjoy these Blogs and all the great information.  I did!

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Posted in personal finance | 5 Comments »

Compounding: You Don’t Understand It’s Power!

Saturday, June 12th, 2010

Compounding

We all think we understand that word, or do we?

In medicine, compounding can mean the process of making medications in the pharmacy with basic ingredients.  A lost art in this age of  prepacked pills.

Compounding also means making mistakes worse-we make a small error on top of another and in the end- a poor result is multiplied.  An example would be diabetics, who are also hypertensive.  Their morbidity, and mortality is not additive, it is multiplied!!

How can we use compounding to our advantage?

You have heard about compound interest, haven’t you?  JD Roth at Get Rich Slowly gives great examples of hw the advantage of compound interest can affect your savings, or retirement accounts.  He gives one example that shows the power of compounding:

Quoting JD-  “If Britney (age 20) makes $5,000 annual contributions to her Roth IRA, and she earns an 8% return, she’ll have $1,932,528.09 saved at retirement. But if she waits even five years, her annual contributions would have to increase to nearly $7,500 to save that same amount by age 65. And if she were to wait until she was my age, she’d have to contribute nearly $25,000 a year!”

Wow, what a difference a little consistency and time takes.

But what about compounding in your life, how does that work?

Darren Hardy (the publisher), in this months Success magazine has an article about the use of “compounding” in our life, in fact he has written a book about it.

But in this example, Hardy discusses the compound effect  small adjustments in your life can have over time.  He tells the story of a guy who cut 125 calories out of his diet every day, and walked 2 thousand steps (less than a mile).  In the first few months, no noticeable difference in his weight or appearance. But with consistency, and time-in 31 months, he lost 33 lbs.

Now compare this to his friend who added that much  125 calories-to his diet everyday by drinking a beer every night-he worked hard and deserved it.  Well-in 5 months-nothing much measurable happened, but by 36 months, he had gained 33 lbs.

Now you are thinking, “How can anyone diet for 36 months?”   Cutting out 125 calories is not a diet, that is cutting out the equivalent of a 16 oz soft drink, or 1/3 of a cinnamon bun/day- or one adult beverage.

But to be successful, you can’t replace that 125 calories in another part of your diet-by snacking more or eating more at another meal.

Compounding has tremendous power, whether in your financial life or your personal life and development.  Minor changes, whether it’s reading a blog like “The Millionaire Nurse Blog” every day, saving a little every day, cutting back on your eating-or exercising a little more are great examples.

All of these small changes, when magnified over your lifetime, can have dramatic changes in your health, your finances, or even your happiness.

Do you think-this money stuff is too hard to learn, so you  continue to do what you  have always done?

Let today be the day you get started with small changes.  Make a minor adjustment, even if it is just spending 15 minutes per day reading blogs or other  articles about money management.  Over time, you will know a thousand percent more about money and its management than you do today.

You and your family will be glad you did!!

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Posted in goal setting, personal finance | 6 Comments »

Needless Tragedy-Dying Without a Will-Don’t Let It Happen To You!

Friday, June 4th, 2010

Dying Without a Last Will and Testament

One of my nurses mother passed away last week. A tragedy enough. But she was in her mid-eighties and her health has been deteriorating for the last several years. It was still unexpected, as these things frequently are.

However, as she and her brother were discussing the arrangements, they were shocked to find, she had no Will.
Or at least not one that they could find. The mom had assured them for years that she had a Will, and even said who the executor would be.

But now that she has passed, no Will can be found. She was not a wealthy person, living on her Social Security, and having minimal assets.

However, the funeral arrangements need to be covered financially. Neither of her children are  able to help at this time for varying personal reasons. So dealing with this will cause financial strain for the family, in addition to the emotional turmoil that occurs when losing your mother.

The legal processes for dealing with your financial/personal estate after your passing is complicated and time consuming enough, even with a Will and extensive instructions for your remaining family.

But not having a Will increases that difficulty ten fold according to many financial planners.

Many excuses abound for not having a Will:

  • Too Busy
  • Too expensive
  • No attorney
  • Too morbid-don’t want to think about dying.
  • I can’t decide who get’s what, so I will just ignore it!
  • I just want my hateful,  unappreciative  leeches I call children to have to deal with it!!!!!!

Why you should have a Last Will and Testament:

Here are my responses to the above:

  • You think you are busy now-right!  Now do you think your children or loved ones are any less busy? Think about it as if you are the one calling probate judge, funeral home, banks, insurance agent, and all the other varied professions that have to be dealt with when you lose a close relative.
  • Do you think burial costs are going down?-Deal with it now, pre-pay the funeral costs-pick out your urn/casket.  Don’t make your grieving kids/husband/wife deal with this.
  • If you can afford an attorney, and have a complex estate, by all means hire one.  Let them lead you through the process.  But if you don’t have one, and your estate is simple, just get a simple Will-I have written a review about several  online options that are available.
  • Yes, you are going to die.  Deal with it, so your family doesn’t have to!
  • Don’t let your family tear itself apart, fighting over your stuff, or money.  Keep in mind, what they say about you after you are gone, will NOT hurt you!!!
  • If you want to hurt your children, think of other, more fun ways to get ‘em.  Maybe a requirement to visit and leave flowers at your grave every year to collect on your estate….Or leave all your money to your cat!  Be creative, but please do something!

Reader comments about leaving a Will:

Do you have a Will?  Why or why not?  Is it too expensive, or just haven’t gotten ‘roun to it-as we say down here?

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Posted in personal finance | 7 Comments »

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