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Archive for the ‘setting goals’ Category

Aligning with Your Partner Financially

Tuesday, February 10th, 2009

I haven’t posted in a while, but I’ve been talking my head off. I recently did an hour-long interview with Minnesota Public Radio on money and values. Some really interesting calls from listeners, including a couple headed to Uruguay with only the stuff they could carry. To listen, click here.

In my Valentine’s Day Yahoo!Finance column, I look at how couples can be better aligned in their finances. Given the gloom in the media lately, I wanted to focus on couples who were getting things right, who were taking action to improve their teamwork – whether it’s working with a coach or finding the right tools to track their finances.

I’ve found that couples who are peaceful about their finances have a few things in common: They agree on the importance of living within your means; they communicate about their values and goals; and they trade off financial responsibilities.

Consider Amy Goldsmith, a New York attorney I interviewed for the story (who didn’t make the final edit.) She and her husband Bill, also an attorney, chose to live below their means because of the uncertainties involved with raising and educating three children.

When they purchased their home in the mid-1990s, they were told they could borrow up to $700,000. They bought a smaller home on a busy street and took out a loan for just $250,000, so the payment could be made on one income in the event of job loss. (They will have their mortgage paid off when their youngest child enters college.)

That decision turned out to be a hedge against soaring college costs. “When I graduated in 1982, my tuition at Cornell was $2,300,” Goldsmith notes. “The tuition right now is $28,000 – that’s where my son is going – so it’s far outpaced anything that anyone could plan for.” (On average, between 1982 and 2007, college tuition and fees rose 439 percent after inflation, according to the National Center for Public Policy and Higher Education.)

Because they have always lived frugally – choosing a smaller mortgage payment, driving used cars, taking just one vacation a year – the Goldsmiths were able to contribute current income to cover their savings shortfall. “Though our lifestyle is not what we want it to be at the moment, there is a benefit because we are able to send our kids to school,” says Goldsmith. “If you manage risk properly, you’ve taken a weight off your shoulders. Sleeping well at night is biggest reward.”

Successful couples also share financial responsibility equally, and stay on top of their bills. “When the three kids were young, and up to a few years ago, Bill was responsible for paying the bills — I was on night duty,” Goldsmith wrote in an email. “Now, it is my turn. Bill is responsible for Quicken. We use automatic bill-paying for some expenditures (i.e., the mortgage) but not all. For instance, I won’t have the cell phone bills paid automatically since I have found that the bill needs to be analyzed carefully for errors. We were overcharged by $700 one month and if we had used automatic payment, we never would have been able to recover the funds.”

Getting on the same page financially pays off long-term. Economist Jay Zagorsky, a researcher at Ohio State University’s Center for Human Resource Research, tracked the financial and marital status of more than 9,000 people from 1985 to 2000. He found married people accumulated an astonishing 93 percent more than single or divorced people over the 15-year study. Those who divorced saw their wealth reduced by 77 percent on average.

Separately, Zagorsky published research that found one reason married couples argue about money is because they don’t agree on how much of it they have. The typical husband says the couple earns 5 percent more income, and has 10 percent more total wealth than his wife reports. Meanwhile, the typical wife says that the family’s debts are $500 more than her husband reports. And both men and women in a marriage estimate that their spouses earn less than their spouses say they do.

Interestingly, couples who did not divorce were more in accord on their estimates than couples who divorced – indicating better communication on the issue. Boston-based financial coach Belinda Fuchs has devised a survey for couples to assess their financial compatibility. Click here to take the test.

Blaming Each Other for the Financial Crisis

Sunday, November 2nd, 2008

According to a recent survey by myFi, a financial service of Citi, Americans are largely blaming one another for the financial crisis. Among the 5,000 people polled, 72 percent blame the crisis on excessive spending by American consumers; 64 percent blame Wall Street; 62 percent blame excesssive borrowing by homeowners; and 59 percent blame the federal government.

I think there’s plenty of blame to go around, which I laid out in this Yahoo!Finance column. The one issue I failed to mention was that on Capitol Hill, almost no one is looking out for the common man’s finances – only for the people who provide campaign contributions. Hedge Fund manager Andrew Lahde discusses that problem pretty eloquently in his farewell missive to the shareholders of his hedge fund, which he closed after just one year — in which he earned an 866% return betting against the subprime collapse. CNBC posted Lahde’s letter on its website.

It’s worth pointing out that there are still a few elected officials pushing legislation to protect the consumer:

-Reps. Carolyn Maloney and Barney Frank have introduced a bill to limit aggregious practices by credit card companies.

-Reps. Herb Kohl and Tom Harkin have advocated for better fee disclosure from 401(k) plan providers, so you can see if your plan provider is gobbling up a good chunk of your investment return. Kohl has also introduced legislation to partially address the issue of banks illegally freezing the social security funds of senior citizens.

-Reps. Russ Feingold and Hank Johnson sponsored a bill to address unfair mandatory binding arbitration agreements, which are now in virtually every consumer contract you sign.

- Maloney, Frank and Rep. Julia Carson have sponsored legislation to protect consumers from unfair bank overdraft practices.

Who do you blame for the economic crisis?

What Does It Mean to Retire?

Saturday, November 1st, 2008

I’m intrigued by the controversy over my Yahoo!Finance column on Madison DuPaix, the 29-year-old retiree. Many readers were outraged that I would profile a woman who says she saved enough to quit her full-time gig at 29.

DuPaix told me she accumulated enough to replace her full-time income by drawing down 2% of what she put away. She would not give me the figures. Maybe I’m naive, and I was suckered by a self-promoting blogger. But I don’t think so. I did my own back-of-the-napkin assumptions; if she were making $75,000 working in finance/insurance and two-thirds of it went to daycare, taxes, and savings, then her cash flow was $25,000. She would need to have saved $1.25 million to draw down 2% and stay cash-flow even.

Impossible to accumulate that amount over 13 years? Not necessarily. She worked through college with no expenses (full scholarship) and was investing in index funds as early as 1995 — the beginning of a significant bull market. She told me her entire portfolio, savings and interest, had grown 862% since 2003.

She married young, which halved her major expenses such as housing, and lives in the Midwest, where costs are significantly lower. Both she and her husband were super-saving for six years; and they sold a condominum at the top of the real estate market. She never carried any debt, except a very low-rate mortgage.

She says her spouse could retire too (under my imagined scenario, they would live on $50,000 a year, or 4% of their portfolio, plus part-time blogging income) but he prefers working. It’s a bit of a cheat that he provides health insurance – that would be a big expense if they both quit full-time. But a family in good health can get health insurance for $800 a month. I know, because I pay for my own health insurance. That’s not a gigantic amount of money in the big picture, especially if they incorporated their blog as a business and could write off the health insurance as a business expense.

Madison now blogs part-time and is home with her kids, age 2 and 1. This led to many comments on Yahoo!Finance about how she is really a stay-at-home-mom sucking off her husband’s income. But that’s an unfair characterization if she contributes the same amount of cash to her household without working full-time, and he could, if he wanted, leave his job too.

I wrote about Madison because I thought her philosophy was intriguing, even a bit twisted. She went into the workforce with the idea that full-time work is something you should get out of the way as quickly as possible. I’ve almost never felt this way about work because I chose a career I loved. Madison told me she also loved her job — but if you genuinely loved your job, you wouldn’t quit. Unless there is something you love more, which in this case, is apparently her kids, and having complete control over her time.

I get this. I left CNN in 2001 when my kids were 3-1/2 and 16 months old. I did not enjoy being laid off with 1,000 other people after the AOL merger because I loved my job (enough to actually do it full-time) and my husband worked part-time from home. Since severance bought me a little time, I figured I would reconfigure my career to work mainly from home and have more balance.

Because my kids were so small (and I had another one) there were many nights when flexibility meant working from 2am to 7am. Now that my kids are in school full-time I get a lot more shut-eye. But I would happily suffer the years of sleep deprivation all over again to get the kind of flexibility I enjoy now. (I sure don’t have DuPaix’s level of flexibility, but then I chose to live 35 minutes from New York and send my kids to private school.)

That’s the other enormous unknown in Madison’s story — which I discussed with her but could not fit in the column. Her kids are babies. As any parent with older kids knows, her costs are going to explode — not just college savings (she already has 529s going for them) but the academic, sports and other enrichment costs. She joked about having to go back to work if one of her kids wants to be an Olympic athlete. I didn’t have the heart to tell her she may have to go back to work just to cover math tutoring, soccer, piano lessons and family vacations.

The comments were pretty bitter, I’m guessing because DuPaix won’t reveal the numbers in detail — and maybe no one wants to read about someone succeeding when the economy is in the tank. But I’m always inspired by people who set really high, clear goals and then have the discipline to stick with them  — whether they’re Olympic athletes or early retirees.

Finally, I don’t write the headlines on Yahoo. The editors do, and of course they lean toward the sensationalistic to drive more traffic to the site. I don’t know why people find this surprising. Newspapers have done it since the printing press was invented. (I don’t get paid based on traffic, so I have no incentive to sensationalize.)

And no, I did not receive some kind of kickback from her blog. (Geez, there is some serious cynicism out there about journalism.) For the record, I do not post any editorial here for which I’m paid or receive a commission from click-throughs, which is standard at many personal finance blogs. I just want to help people manage their money better, and create a forum where people can share useful ideas. I thought DuPaix had a few useful ideas worth sharing. I would love to hear yours as well. 

A Brief Encounter with Greenspan

Wednesday, October 29th, 2008

I met Alan Greenspan last weekend at an event in Washington D.C. thrown by my alma mater, the University of Illinois. Ben Bradlee received the Illinois Prize for Lifetime Achievement in Journalism at the Newseum (a truly amazing space), and the place was hopping with journalistic legends, including Bob Woodward, Jim Lehrer, and Bob Schieffer.

I had gone up to a former CNN colleague to say hello and found myself standing next to the former Fed chairman and his wife, NBC’s Andrea Mitchell. Unfortunately, I can only report that he drinks diet Coke, because Mr. Greenspan moved away rather quickly after the introduction.

I suspect he was in no mood for questions after his four-hour grilling the day before in front of the House Committee on Government Oversight and Reform. Greenspan admitted his free-market, anti-regulation ideology had ultimately been a mistake.

As he wrote last March, and quoted to the lawmakers: “Those of us who looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”

Greenspan, like many on Wall Street, was tripped up by over-confidence (or possibly irrational exuberance?) in the U.S. housing market. See this Yahoo!Finance column for the view of a Wall Street insider.  

What I found most interesting about Mr. Greenspan’s testimony was his explanation of how difficult it is to make accurate predictions about the future course of the economy and the markets. At another event that weekend I spoke with two Wall Street professionals — one who suggested I should have nothing in stocks at all (my retirement portfolio is about 40% in stocks) and another who suggested I should have 100% in stocks and be buying on margin.

More proof that the old adages — figure out your risk tolerance and time frame, and create an allocation that reflects them — still apply. 

Lose Weight, Get Rich: Write it Down

Thursday, July 10th, 2008

I discovered yesterday, to my consternation, that a tall skim latte has 100 calories. I’m not a daily Starbucks drinker; I indulge once or twice a month. Anyway, after reading a report that found keeping a food diary can double your weight loss, I decided to write down what I ate, and looked up the calories on Starbucks.com. (I’m not overweight but must be thinner than my sister Mary before our family reunion in August. Hopefully she won’t read this.)

I had this idea in the back of my mind that there are no calories in a tall skim latte, which is absurd, since the skim milk has to count for something. But these are the mental tricks we play when we don’t have a handle on the real numbers.

The process works the same for money as it does for food. Unless you write down exactly what you’re spending your money on, it will be impossible to figure out why you’re not making progress toward your financial goals. Unless you crunch the numbers with a credit card payoff calculator and figure out how much that interest really costs, you’ll continue to run up debt.

See this post for an overview of how to track your spending the old-fashioned way. As my finances grew more complicated, I switched from pencil and paper to online budgeting software. I use Mvelopes, which links to your checking, savings and credit cards, and electronically records all your activity. It shows up in a big transaction folder, and you click and drag each item into the right category: food, rent, clothing, and so on.

I also discovered yesterday that salad really does have almost no calories. And is cheaper, and better for you, than a latte.   

Readers Offer Savings Tips

Monday, May 19th, 2008

Last week I asked readers of my Yahoo!Finance column “Can You Live on One Income” to send in their savings tips (there are also loads of smart savings strategies in the comments below that column). Here are the highlights of reader emails:

I use Excel as a tool to create and manage my cash flow. My budget is based on what I can realistically save over the next 24 months. It took me about six months to develop enough data to track my baseline expenses and normalize recreational and incidental expenses. I am still working on the cash flow management issues with bonuses and windfall income, but I have a much better chance of keeping self control if I hold myself accountable by tracking credit cards and savings.

I use my monthly budget and add in EVERY expense from going to the movies on the weekend, to buying plane tickets to see my family. I can accurately predict how my savings over the next year will be affected if I buy that extra cell phone data plan, or that $80 dinner. It puts everything in perspective when I look at my books every week to see where I am, compare it to where I thought I could be, and then adjust expenditures to get where I’m going.

One of my goals is that I’m “financing” a $30,000 wedding for next May. This is a constant iteration of choosing venues, catering options, and various luxuries and services that come with each. I could wait until next May and use credit for most of it, or I can start making payments now and avoid all the interest. Every dollar I spend today is that much harder I’ll have to work tomorrow to make up for it. It’s a nice goal and when I meet the goal I can celebrate with a beautiful day.

Other goals include building and maintaining an emergency savings fund, paying off all my debt, and of course early retirement. If you don’t give yourself a real measurable goal, track your progress, AND hold yourself responsible, then there is no way to feel successful. Success is a novelty in itself.

If you challenge yourself to beat this debt-driven, consumer-obsessed society then you get three things: A) Your definition of success will be a healthy path toward rewarding self actualization. B) You won’t need that new pair of shoes to feel good about yourself. C) If shoes are what you really want, then you just might be able to go out and get them DEBT FREE.  –Bryan Adamson

I’m sure you are familiar with this speech. This whole thing that we must all have a huge Starbucks, (or someone else’s), deluxe coffee, every day, and at least one a day, is a surefire route to financial failure and health failure. A 16oz, non fat, latte is about $5. How much the huge ones, covered in whipped cream cost, I’m not sure, because I leave them alone. I live beside a coffee shop, and was drinking maybe two a day, plus my girlfriend had the 16oz green chai drink (far too sweet to resemble anything real!). So $10 a visit.  Do this 5 days a week, $50, every week of the year = 50×52 = $2600 That’s alot of money!

Making my coffee at home has done three good things for me: 1. More money. 2. In a couple of months, I have become markedly thinner, (isn’t that what everyone wants anyway?) 3.  Don’t waste time standing in line in the coffee shop, listening to all the other people I don’t want to hear anyway.  –J.C.

Tips that help me: 1. Pay your bills the same day they arrive in the mail. 2. Pay your credit card online, you can make four payments/billing cycles a month, which makes it in smaller chunks instead of one big bill. 3. Consignment and Good Will are fun places to shop. 4. Only go grocery shopping once a week. 5. Do not be a “food snob” and shop at the fancy grocery store; but don’t drive all over town to save a dollar off coffee either. Stock up on two-for-one deals. — Lori, Florida

I grew up in Taiwan. My sister, brother and I all save about 60 percent of what we make every month. 1. Cut spending on clothes (especially on designer items).2. Cut spending on cell phone (I use my cell phone only receive phone calls; I always use Skype to make phone calls). 3. Make friends with those who are frugal (but of course also those who believe in big dreams).

My brother is 31. He is an elementary school teacher, making about $1,000 a month after taxes. He saves $600 a month and after five years of working, he had saved $30,000. Together with his wife, they put $60,000 down to pay for a $150,000 four-bedroom home. My little brother never spends money on clothes, doesn’t travel overseas. He occasionally buys the latest digital things, but not often. My sister is 36. She works in an elementary school as an administrator. She makes about $1,500 a month. After ten years of working, she saved about $100,000.

Save on Utilities and D-I-Y: I never buy high octane gas, yet my last car had well over 200,000 miles on it. I figure I save at least $100 to $200 or more a year.

I used to eat everyday in the office cafeteria and easily spent $50 a week between lunch, coffee and a snack. Now I brown-bag my lunch most days of the week and save at least $1,500 annually.

In the winter while I am at work, I turn my thermostat down to 60 degrees. In the summer time I put it up to 80 degrees. It’s on a programmable thermostat so I don’t even have to think about doing it. It’s programmed to go back to a normal temperature by the time I get home. I save hundreds of dollars per year. I do as many projects around the house as I can rather than hiring a contractor. For example, an electrician recently gave me an estimate of $400 to hang a chandelier. I figured it wouldn’t take him very long to do it and thought $400 was too high a price. I shut the electricity off at the circuit breaker and installed it myself in about an hour saving myself $400. If I go out to a restaurant, the portion of my meal is usually more than I can eat, so I ask for a take-out carton and eat the other half of the meal the following day. When I wash clothes, I use the cold water setting which cuts back on the gas bill since the hot water heater never kicks in. With the dishwasher I keep the heated dry button in the “off” position which saves some on the electric bill. When the weather is nice, I wash my car myself and save the $6 that the car wash charges. I use my credit card for almost all purchases since I get 3 percent back on many purchases including gasoline. I hope these tips are helpful. –Patrick

Justify Your Purchases: I appreciated your article on ways to budget more effectively for the downturn. I also say to people justify your purchasing. When you go to buy something and make this decision mentally before you buy. The question has to be “Do I really need this item?” or can I live without it for a little while. In most cases about 90% of the time you can live without it. It saves a lot of cases of buyer’s remorse. You don’t have to feel guilty about buying something if you don’t buy it in the first place. Figure it out in your head: How much did you have to work to earn enough to pay for the item? Is it worth it to spend this amount of effort to buy something you can wait for? In most cases you can talk yourself out of the item. I guess the biggest thing is common sense. Just because your neighbor has something doesn’t mean you have to have it too. Maybe they can’t afford it either! –Tim

Establish Good Credit: I’m in finance, so I tend to be a little paranoid about debt. Yet you must establish a decent credit rating in order to be able to purchase a home, car, etc. I have one credit card with a reasonable limit. When I must make a purchase on the credit card, I go home and deduct the amount of the purchase from my checking account. That way, I know I’m still doing everything I can to build a great credit score, but I also know I will have the funds available to pay the bill at the end of next month without incurring costly interest charges. It’s not much; more or less just a mindset shift, but it’s helped keep both my husband and myself free and clear of credit card debt. –Megan, California

Use Cash At the Pub: When I am going out for a night on the town and I always pay cash at the bar. It’s not too bright to leave a credit card at the bar when you’re drinking — it’s a good way to get skimmed. Once when I forgot to bring cash, the bar had an ATM inside with a $2 transaction fee. The nearest no-fee ATM was 7 miles out of my way (14 miles total). I paid the $2 fee since I drive a huge SUV. –Paul, Texas

Paul: Just a tip – if there’s a convenience store nearby, use your debit card to buy a pack of gum and get cash back to avoid the ATM fee. Also check out Kiplinger’s quick read called “How to Save $451 a Month.”

Living on One Income

Thursday, May 8th, 2008

Today’s Yahoo!Finance column looks at whether couples with children can afford to live on one income. When I sent out queries looking for average couples who are managing on one middle-class income, I got no replies. I worry that it’s a sign that families who are living on one income are struggling, and don’t want to talk to a reporter about it. Or maybe everybody’s busy with end-of-the-school-year stuff and they don’t have time for a reporter. 

In any case, I thought I would throw in my experience on this front. My spouse and I have earned two incomes, but mostly lived on one, for 16 years. We earmark the second income for savings and luxuries — vacations, home improvements, kids’ enrichment activities and the like. What’s worked for us? 

-Minimizing child-care expenses. Instead of full-time care, when my oldest was born I worked the overnight shift producing a morning television show, so I was home with my daughter between noon and 7pm. Over the next ten years, my spouse and I traded off working from home with part-time help. Eliminating a commute gives you time to take care of basic household chores and to grocery shop quickly (not during peak weekend crowds), so you eat take-out less.  

Working without full-time child care sometimes meant working in the middle of the night or weekends to finish a project. I also tried (sometimes unsuccessfully) to push the biggest projects into the school year and cut back in the summer.  

It also means making strategic decisions about the kind of jobs you take and how much you work so that your income isn’t eaten up by taxes and childcare.I would argue that if you can work from home on a freelance basis and it doesn’t create enormous stress and turmoil in the household, do it – even if your profit is minimal for a few years. It’s an important investment in the future. Eventually, your kids will be in school full-time, eliminating childcare expenses, and your experience, skills and contacts will translate into more work at a higher wage. It’s also a critical safety net if something happens to your partner.   

-Developing a support system. It helped to move out of New York City and into a kid-oriented suburb where we quickly found friends and developed a support network, and had family an hour away.  

-Minimizing automobile expenses. I’ve blogged about this before. We own one used car and take the train to work. 

-Staying debt-free. We have never carried revolving debt of any kind; our only debt is a 30-year, fixed-rate mortgage. -Always maintaining some kind of emergency fund — whether it’s a few hundred dollars or a few thousand dollars. It keeps you from pulling out a credit card when something goes wrong with the car. 

-Saving for retirement aggressively before you have children. I always tell people who are 21 to max out their retirement savings — because if they save for just nine years and stop, they’ll have more money than if they start at age 31 and save for 30 years. Some people tell me this is bad advice because who has money to save in their 20s, and their incomes will be higher later. I would argue, from experience, it’s a lot harder for a family of five to save than it is for single person out of college. 

-Keeping it simple. We take full advantage of local parks, the library and school-sponsored sports (can someone please explain the benefits of putting an eight-year-old on a traveling team and spending the weekend in the car?) We own a 15-year-old television. Every time I think about buying a fancy flat-screen, I remind myself that the last thing I want to spend my free time doing is watching T.V.   

I would love to hear your ideas for living on a single income.

Retirement Worries Grow

Wednesday, April 9th, 2008

More Americans are worried about their ability to afford a comfortable retirement, according to the annual Retirement Confidence Survey conducted by the Employee Benefit Research Institute. A few of the findings include: 

• More anxiety: Confidence levels have dropped to their lowest in seven years, reflecting worries about health costs, the economy, and home values, EBRI finds. Anxieties rose across all ages and income levels — but were particularly acute among younger and lower-income workers.  

• The percentage of workers who reported being “very confident” about having enough money for a comfortable retirement decreased sharply, to 18 percent in 2008 from 27 percent in the prior year — the biggest one-year drop in the 18-year history of the survey. Retirees are also feeling shaky – with just 29 percent feeling confidence about their financial security in 2008, down from 41 percent in 2007.   

• Growing health-care concerns: Among retirees who left the work force earlier than planned, more than half (54 percent) say they did so because of health problems or disability. Some 44 percent of retirees say they have spent more than expected on health care expenses. More than half of retirees (54 percent) say they are now more concerned about their financial future than they were right after they retired, up from 40 percent a year ago. 

• More are planning for retirement: Some 47 percent of workers say they and/or their spouse have tried to calculate how much money they will need for a comfortable retirement, up from the 42 percent in 2004–2006. The study found that doing a retirement savings calculation is particularly effective at changing worker behavior: 44 percent who calculated a goal changed their retirement planning, and of those almost two-thirds (59 percent) started saving or investing more. (Dartmouth economist Annamaria Lusardi has also found that people who at least try to plan for retirement ultimately end up with more than those who don’t.) 

• Savings levels remain modest: Some 72 percent of workers say they have saved for retirement. Nearly half report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $50,000. Twenty-two percent of workers and 28 percent of retirees say they have no savings of any kind.  

You have until next Tuesday, April 15, to contribute to an individual retirement account (IRA) for the 2007 tax year. Get going.   

Don’t Be Clueless About Family Finances

Wednesday, February 13th, 2008

I came across an interesting thread on Wesabe, the financial social networking site:

“I have a very good friend whose spouse has a serious spending addiction — to the tune of over $100,000 in credit card debt in the last 10 years. He’s paid and closed account after account, mortgaged the house to the hilt, went to counseling, etc. He doesn’t want to divorce her as they have three young kids. Likewise, he won’t press charges against her for fraud (she takes cards out in his name too). He’s got the credit alert services, tries to beat her to the mail box but this is only so effective and is “after the fact” anyway. She had a secret P.O. box for a while where the bills went so he wouldn’t find out about them. I found a website for him tonight where he can freeze his credit info that looks like it would help some. But, surely there is some legal relief he can take that declares him no longer responsible for what she is doing. He says it is for naught because the house belongs to both of them. She is a stay at home mom. Any ideas?” 

A heartbreaking story, and it might have been avoided. (At least he knows what’s going on.) The problem is, most people don’t discuss their money merger before marriage. Here are a few tips: 

-First, review your mutual spending over the last month, withholding nothing but judgment. Come clean on all your debts – student loans, credit cards, etc.. Order your FICO scores and if they aren’t up to par, come up with a debt pay-down plan to boost your credit scores. This is crucial for getting the best deal on a mortgage and other kinds of borrowing you may do in the future. 

-Contribute equally to a joint checking account for household expenses—either a set amount each month, or the same percentage of your incomes.  

-Talk about what you will do when children come along. Will you use professional daycare? Will someone put their career on hold to stay home? If so, what adjustments will you make to manage that loss of income? How will you structure your finances, and the division of household labor? 

-Keep separate checking accounts for those crucial indulgences—football tickets, hot stone massages, or whatever else you love. In addition, contribute to your own retirement savings account, even if you are a not working outside the home, and keep at least one credit card solely in your name. (One study found that a quarter of women over age 50 still have credit only in their spouse’s name. That makes it tough to get a credit card or make other important financial moves should something happen to him.) 

-Decide which one of you will be the family’s chief financial officer. If you both hate dealing with money, trade off paying the bills month to month and talk to a financial planner about the bigger picture.  

-If either one of you has had a problem with debt in the past (or compulsive shopping, gambling or another money problem), consider technology to help rebuild trust. The major credit bureaus – Experian, Transunion and Equifax — offer a service that scan your credit report daily for changes (such as a change in balance on a credit card), and send an email alert. The cost: About $10 a month – a small price to pay for helping keep your relationship on solid ground. 

A final word on relationships: No one should be in the dark about how much you have or where the money is going. Roughly half of marriages end in divorce. If you divorce, you will want to know everything that should be discussed in the settlement, and how to locate it. (Forensic accountants cost tens of thousands of dollars.)   

Keep a careful record of the names of the institutions, account numbers, passwords, tax records, etc. If your spouse is like mine – totally uninterested in finances – include a list of professionals who can help. I put together a file (called “If I get hit by a bus”) for my spouse, with the name and number of a financial planner he should call to take over managing our investments.  

The “Tens” Who Earn Millions

Wednesday, February 6th, 2008

In my Yahoo!Finance column that posts Feb. 7, I report on a new study that finds people who rank themselves an “8” on a happiness scale of 1 to 10 achieve more in income and education than people who rank themselves a “10.”  The theory is that the “8s” experience some level of dissatisfaction that may drive them to pursue their goals more aggressively.

I thought I would put the study to a thoroughly unscientific test with a group of very driven people. I was a guest on CNBC’s The Big Idea with Donny Deutsch on Monday night. The program featured several entrepreneurs who have gone from zero to building multi-million dollar businesses. They include: 

-Cameron Johnson, author of You Call the Shots, who made his first million before graduating high school;  

-John Assaraf, founder of One Coach and author of the best-seller Having It All, who started his business at age 26 and now runs a company with $5 billion in sales (he appeared in the video The Secret);  

-Dawn Barnes, who built a successful chain of karate schools in California, going from zero to more than $3 million in revenue in the first dozen years;    

-and Kaile Warren Jr., who went from being homeless in 1996 to founding the handyman franchise Rent-A-Husband, which now has $13 million in sales, and a new partnership with Ace Hardware that could boost growth 10-fold in the next few years.  

I asked them, considering all aspects of their lives, how would they rate their happiness on a scale of 1 to 10? They were all 10s.

 Warren rated himself a “12-and-a-half.”  

“I am more driven now than ever,” explains Warren, “because of starting from where I started. When you’re homeless, you have no confidence, it’s like you’re not really there, you’re hollow inside. If you then find something that recharges you spiritually and emotionally, it becomes addictive – you can’t get enough of it.” 

After a car accident left him injured and unable to run his small construction firm, Warren fell deep into debt, and lost his home and marriage. Sleeping in a rat-infested abandoned warehouse in Maine, he prayed one night for a break, and got the idea for Rent-A-Husband, a handyman service for all the minor jobs that never get done.    

“I want to redefine this fragmented and unsophisticated business; take care of the customers’ needs, and create a career path for handymen,” he told me. (Warren’s company offers a nationally certified apprentice program that allows participants to become master plumbers, carpenters and electricians.)     

Johnson, 23, says he is a 10 in happiness, but that hasn’t affected his drive. “If you asked me if there was anything not fulfilled in my life, I’d tell you ‘no’ — which would lead me to choose a 10 rating,” Johnson wrote in a follow-up email. “But I’ve always said you should make your future bigger than your past, and nothing is ever perfect. So going off of that, and knowing my own goals and ambitions — I’m a 10 and want to be a 20.”    

I think the key here is that entrepreneurs are relationship-savvy – and so are people who rank themselves “10” on happiness surveys. In a survey of college students, for instance, the 10s had more self-confidence, more energy, were more outgoing, and had more friends. The 8s were more conscientious, more likely to attend class, and had higher grades, and had fewer friends.    

Consider the fact that many high-flying entrepreneurs didn’t perform well in school; Assaraf says he was running with street gangs at age nine, and left school when he was 19.  Last year I interviewed Barbara Corcoran, who built New York City’s largest residential real estate company over three decades, before selling the Corcoran Group for $66 million in 2005. Corcoran was a dyslexic who said she was “terrified” of being called on in school, and nearly flunked out. (Dyslexia and attention deficit disorder are common among entrepreneurs – check out this new study covered in The New York Times, and this piece in Businessweek.) 

“I think poor students make excellent entrepreneurs,” Corcoran told me. “School is often a cookie-cutter system that evaluates kids based on a narrow definition of what’s great. When I got out of school, I felt like a jail bird that had been set free.”   

She recalled a conference of the Young Presidents Organization, which includes wealthy people from all over the world who own large businesses. “There were 1,500 people in the room, and a child specialist was speaking,” Corcoran recalls. “She asked, ‘How many people in this room were horrific students?’ And one by one, people raised their hands until it was more than half the room.”  

Corcoran, the author of If You Don’t Have Big Breasts, Put Ribbons on Your Pigtails, says the key to her success was hustle, confidence and relationships. “You build wealth through people,” she says. In other words, those high-achieving “8s” end up working for people like Corcoran.  

For Assaraf, scoring a 10 on the happiness scale without losing his drive is a matter of discipline. He’s a 10, he says, ”because I have been a student of (happiness) for 30 years and apply what I have learned,” he says. “Most people don’t research how to be happy, and what really constitutes their happiness.”  

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