Archives For December 2008

For some reason I got the December 15th issue of Barron’s today (I got the December 22nd issue on Saturday). Anyway, Alan Abelson’s column ($) was about the Madoff fraud. I like this quote from his column:

What Madoff’s investors lacked in numbers, they more than made up in wealth. Which proves that cupidity and stupidity are as rife among the rich as among us peons.

Reminds me of what I wrote last week.

I’ve written in the past about how my wife and I handle our kids’ allowances. Basically, we pay our boys $10 per week. That allowance means that my wife and I are not hassled for stuff every time we go to a store. If they want to buy something extra, they have to use their allowance money.

The problem is that we live in a cashless society. Everything my wife and I have is automatically deposited into our checking and savings account. We rarely have cash unless I make a special trip to the ATM to make a withdrawal or remember to get cash back at the grocery store. The problem with this is that I rarely have the necessary change to pay the correct allowance.


I have been rethinking how we pay allowance.

I called our bank and found out that we can get our boys check cards that we can load up for them. The banker told me that he didn’t think they had fees but I’ll have to find out for sure. I have an appointment with him today. I’ll let you know what I find out. They also have a teen checking account that looks interesting. Only one of our boys would qualify for this type of account.

I’m a little nervous letting our boys have a check card but they have to learn to handle money some way and since their account would rarely have more than one month’s worth of allowance, I don’t see downside other than overdraft fees. I’ll have to find out more from our bank.

I can see this as an excellent learning opportunity for our kids. I can also see this leading to more responsibility in the future as my wife and I give them a clothing budget and make them responsible for clothing purchases (hey, they gotta learn sometime!).


I do want to make one thing clear: my wife and I will still be very involved in their financial decision-making. In other words, our boys won’t have free-reign.

UPDATE: I just got back from the bank. I signed our boys up for “Youth Cash Card Accounts.” The accounts are in the boys’ names with my wife and I as co-owners. There’s no charge to have the cards unless the boys overdraft. I doubt that will happen. If it does happen, the boys will be responsible to pay it back AND they will lose their card privileges. It’s my goal to show them how to keep track of their spending so that they never get to the point where they are overdrawn.

The accounts are separate from our checking account but linked so that I can transfer money into the account for them—something I plan on doing once a month. The boys have no online access so they can’t logon and move money around or anything like that. They will have to rely on me or my wife to look up their balance. I will show them how to keep a register so that they won’t have to ask us how much money they have.

The only thing I’ll have to work around is how the boys pay their tithe. These aren’t checking accounts so they won’t be able to write a check to pay their tithes. I’ll figure something out.

The downside to this is that their cards could get stolen. But, I don’t see them taking their cards anywhere without at least my wife or me being with them.

From yesterday’s Wall Street Journal [empasis mine]:

Harris Cohen, a 25-year-old project manager with Amtrak in Washington, D.C., opened an individual retirement account in 2001, when he was 18, and filled it with stocks he thought had a bright future, including Apple Inc. and Garmin Ltd. He bought mutual funds that invest in alternative energy companies and utilities. He didn’t bother with bonds.

“I had a real good track record over five or six years, with increases from 10% to 20% a year,” Mr. Cohen says. His portfolio has fallen about 40% over the past 18 months, he says.

In September, he began pulling back from stocks. Now, he has shifted his retirement savings to corporate bonds, a money-market fund and a few utility funds. He says he doubts he ever will view stocks the same way. “Even if the market were to rebound and the economy were to improve, I would be very loath to invest entirely in stocks,” Mr. Cohen says.

Source: Stock Investors Lose Faith, Pull Out Record Amounts

For a 25-year old to have his entire retirement savings in corporate bonds, money market funds, and utitility funds is very telling. People are giving up on stocks (known as capitulation), which means they are FINALLY getting back to a level where they are bargains. When stocks are bargains, they offer great upside potential over the long-run.

I think this guy is making a huge mistake. Instead of moving money out of stocks, he should be buying more. Sure, there’s no guarantee that stocks will move up anytime soon but…he’s 25-YEARS OLD! What does he care what the market is doing now?

I know it’s no fun to look at a sagging retirement fund. My wife and I are down 40% so far this year. It’s not fun to check our balances. But, I’m still 100% stock funds and have never considered moving money around. Instead, I’m looking at our budget and planning on MAXING out her 401(k) in 2009.

My advice for Harris, the guy in the story mentioned above, is to max out your retirement plan and file away your retirement plan statements without looking at them. Looking at them is only going to make you want to move your money around. The only time that’s advantageous is when you see something coming, not when it’s already passed.

Here’s this week’s Ten For Tuesday

1. Day 9 of Wisdom Journal’s 12 Days of Christmas.

2. David over at PimpYourFinances has 20 Questions with J.D. Roth – author of Get Rich Slowly.

3. The Digerati Life shares her thoughts on the Madoff Ponzi scheme.

4. Mrs. Micah talks about freelancing and how she sets prices.

5. Meg got a gun for Christmas.

6. Nicole over at Budgeting Babe does a personal review of 2008. – I’m impressed with her financial accomplishments! Way to go, Nicole!

7. Bluntmoney interviewed Nicole from Breaking Even, a personal finance blog.

8. Bluntmoney’s interview is responsible for me finding Nicole’s thoughts on The Secret Millionaire. – I saw previews for this show but have not yet watched it. I might have to check it out.

9. Emily Brandon at U.S. News & World Report’s Planning to Retire blog, reintroduces their “How does your 401(k) Compare?” tool. – I looked the other day and found that my wife’s 2008 personal rate of return was -40%!!!! That was the first time I had looked at her 401(k) balance in well over a month—it’s just not fun to look these days!

10. Charles Kirk posted A Christmas Wish.

That’s it for this week’s Ten for Tuesday. Enjoy!

NOTE: Next week’s Ten for Tuesday will be a 2008 Look-Back Edition. If you’re a blogger and you have written a look-back post, please email me a link and I’ll try to include it in next week’s Ten for Tuesday.

Recently, ‘Poor Boomer’ left the following comments on AFM about education:

Poor Boomer:

What’s with all the education hype? I have an awful lot of education and a minimum wage income – so what’s so great about education?


poor boomer,

Education does not equal a great income.

Have you ever asked yourself why you only make minimum wage?

Poor Boomer:

It’s obvious why I make only minimum wage – I have no marketable skills and no career-related experience. (I got a liberal arts degree with law school in mind, but couldn’t afford law school, so my degree is now worthless.)

His answer bugged me so I sent him an email and asked him if I could post about his experience. This was his response:

Hi, no problem – you’re welcome to it. I think a college education is, generally, an excellent investment, BUT one entailing huge downside risks. I can now say that NOT seeking an internship in college (I was sure I couldn’t afford unpaid work) was one of my biggest mistakes. Also, I think there is a moderate time window in which one must “do something” with their education or degree in order to have meaningful career prospects. This time window for me lasted roughly five years, during which obtaining an interview was not especially difficult. After roughly five years, the interviews abruptly stopped coming.

Instead of me addressing this myself, I decided to ask Larry Winget for his help. For those of you not familiar with Larry, he has written a ton of best-selling books. His latest, People Are Idiots and I Can Prove It!, will be released next week (see Larry’s website for details on special he’s running). I like Larry’s style because he doesn’t sugar-coat his advice. He tells it like it is.

So, I sent Larry an email asking him for his opinion and this was his response:

I hear this argument a lot. Rarely do people actually work in the field in which they get a degree. Degrees in education, liberal arts and the like are typically not the educational path to high-paying jobs. In fact, in my opinion, the whole reason for a college degree is the education in discipline it requires to get the degree – not what your area of studies were. It takes personal discipline, personal responsibility and accountability, the ability/willingness to study, the time and effort to get to class and sit through class, the skills to test, the ability to work with others, the ability to set a goal and achieve it, to manage your time and a variety of tasks, and on and on and on. Those skills are the ones that will make you rich and the skills most beneficial from earning a college degree and those are the skills that can make you rich if applied.

People need to realize that “being excellent” at something that no one is willing to pay for is of little value if you measure success in terms of financial achievement (and most of us do.) One really marketable skill – again one and only one – can make you rich.

If someone has a real desire to be successful, all they have to do is ask themselves what skills are people willing to pay for? I will guarantee they are the skills I listed above. All other specific/technical/job-related skills can be taught and most employers are more than willing to teach job-related skills to anyone who has the ability to set and achieve goals, be responsible, manage their time, handle a variety of tasks, work well with others and so on.

Another comment on the posting is this: Anyone – again ANYONE who makes minimum wage is only putting out minimum effort. Tough approach I know, but it is true. Minimum wage jobs are STARTING places – they are entry level jobs into the employment pool. The people who get them and stay in them are the people who aren’t willing to go beyond minimum effort and show their employer they have more than minimum skills.

By the way, my degree is in Library Science. Do you think I would be where I am today utilizing all the marketable skills I learned in that degree program? No. I never worked a day with that degree. I also never used it as an excuse. Instead, I quickly realized that in order to be financially successful, I was going to have to apply myself in other areas and do things that had nothing to do with a library! You don’t get a degree and think your education is over. Education is a continuing process. Therefore, I have read over 4,000 books since I got my degree. I have listened to 5,000 hours of audio and watched that much educational video. I still read every day to make sure I am current on what my audience wants from me. In my world, my audience is both my customer and my employer. This concept must apply to everyone in the workplace. I continue to learn so I will have something of value to offer my employer and my customer. Everyone must ask themselves if they are doing the same thing.

What are you reading? What are you watching? What are you listening to? Will it make you a better employee? employer? manager? salesperson? janitor? or will it only entertain you and leave you as stupid as when you started?

Before you blame your degree for your success or lack of it, go to the mirror and take a good hard look at yourself and answer those questions. Then you will have a clue as to why your life looks like it does.

Larry Winget

Larry said it better than I could have said it myself. I appreciate him taking the time to respond to my email.

Now, let’s open this up for discussion. What do you think of Larry’s thoughts regarding ‘Poor Boomer’s’ situation?

Note: currently has an advertising relationship with Visa.

When did Visa first release its debit card? What was the genesis of the debit card?

Debit cards first appeared in the 1970’s, but they didn’t hit mainstream until 1995 with the launch of the Visa Check card. Today there are more than 800 million Visa debit cards in circulation around the world. And according to the Federal Reserve Bank, debit is the fastest growing payments type at retail, suggesting consumers are definitely gravitating toward debit.

How has the debit card evolved since then?

Debit cards have become a key tool for consumers who want to use funds from their checking account to pay for anything from gas and groceries, to electronics or merchandise over the Internet – without having to use checks or cash. The popularity of debit also has also helped cards to be accepted in places where cash was once the primary way to pay, including fast food, movie theaters, taxi cabs, corner stores, among others. And additional features like rewards make debit cards an even more compelling way to pay instead of cash and checks.

Debit has also paved the way for the emergence of prepaid cards. Not just gift cards anymore, prepaid cards are being issued for everything from consumer rebates and employee incentives, to traveler’s checks, to benefits like unemployment and child support – which were once distributed exclusively by check. Reloadable prepaid cards are also helping to bring the convenience and security protections offered with a Visa card to people without traditional banking relationships.

How could debit acceptance change in the future? Are there new places we can expect to use a debit card that traditionally only took cash or check?

The popularity of debit has really helped to expand the acceptance of cards in new places, where cash was once the primary way to pay. Consumers are using debit cards at merchants like fast food restaurants, movie theaters, bridge tolls, car washes, parking lots and dry cleaners…where even just a couple of years ago, paying with a card might not have been possible.

Can you offer consumers any tips when using a debit card?

Absolutely. Here are some important things to keep in mind when using a debit card:

• Know your current account balance. Don’t forget about checks that have not yet cleared your account.

• Record your transactions in your check register as soon as possible. Remember to include any financial institution fees that may apply. Store your receipts safely in one place in case you need them later.

• Review your statements carefully. If you suspect a mistake, call your financial institution immediately. And always follow up with a confirmation letter.

• If your card is lost or stolen, contact your financial institution immediately. This reduces your liability if fraud losses occur.

• Choose a unique PIN. Avoid obvious choices such as your address, phone number, or birth date.

• Keep your PIN private. Memorize it. Don’t write it down or write it on your card, and never tell it to anyone.

Why do debit cards have daily spending limits?

Daily spending limits vary by financial institution. You should check with your card issuer if you have questions.

Do you have debit card questions? If so, leave a comment below and I’ll see if I can get them answered.

My property tax bill has been sitting on my desk, staring at me for a couple of months now. I’m waiting until the last minute to mail it because I don’t want to part with the money. I have until January 31, 2009 to pay it without penalty but I want to pay them in 2008 so I can deduct them on my 2008 taxes.

Anyway, I thought it would be fun to find out what readers from across the country are paying this year in property tax. Our tax bill for this year is:


That’s slightly higher than last year’s bill. I’m okay with this amount. I know people who live fairly close to me that are paying $12,000 a year in property tax. Of course their houses are worth a lot more than my house but that’s okay with me.

So, what’s your property tax bill for this year (or 2009)?