When Will You Own A Tesla?

• Automotive
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What do you think about electric cars? That’s a question which evokes a surprisingly strong reaction. Few people, it seems, are indifferent to the topic of changing what we drive. Some think electric cars will help save the planet; others think they’re a do-gooder’s overpriced and overrated flavor of the month.

History

The automobile, one of the icons of the Industrial Revolution, has been with us for more than a hundred years. During that time, it has evolved to an astounding degree of complexity that surprises many. For instance, many family SUVs today perform better than the exotic Ferraris and Porsches of just a few decades ago, with improved safety, gas mileage and reliability (not to mention the on-board entertainment systems, air conditioning and power steering, brakes, and windows).

Ironically, though, electric cars were more popular than the gas-powered internal-combustion-engined cars we take for granted today. John D. Rockefeller and Henry Ford used their considerable wealth and influence to steer development in directions which made them the most money, and when gas stations outnumbered electric charging stations, the fate of the electric car was sealed.

In the previous century, all the major manufacturers dabbled with electric cars, especially after the first oil crisis of 1973, which saw dramatic hikes in the price of oil.

Technology

An electric motor has several significant performance advantages over an internal combustion engine. Electric motors last about ten times as long as an internal combustion engine, and weigh much, much less.

But where electric cars really outshine conventional automobiles is in their ability to accelerate. If you have ever tried to pull away from a stop light in your car, you might have noticed your engine struggling at low revolutions per minute (RPM), building up “steam” as the revs climb.

An electric motor, by contrast, has full power right from the start. That means an electric car doesn’t need a four- or five-speed transmission to keep the engine operating in its sweet spot. In fact, it doesn’t need any transmission at all (other than a switch between forward and reverse).

One of the most vivid examples of the electric car’s power advantage over conventional engines is a 1972 Datsun, which accelerates from 0-60 in under 2 seconds, performance generally reserved for exotic super cars costing well over a quarter of a million dollars.

Given the immense power advantages of an electric motor versus an internal combustion engine, one might wonder why high-performance cars haven’t all switched to electric motors.

So, Where Are All the Electric Cars?

What’s keeping electric cars from taking over and saving our planet? In a word, storage. Your conventional automobile stores its energy in a gas tank, while an electric car requires its batteries to store energy. That leads to the vast differences between the two types of vehicles:

  • You refill your standard car’s energy needs for the next 300 miles in a few minutes, but that kind of refill for an electric car can take all night.
  • There are hundreds of refilling stations for internal combustion engines, but far, far fewer for electric cars.
  • Then there’s also the vast difference in the weight needed to carry enough energy for a 300 mile range — so much so that most electric cars have to make do with shorter ranges.
  • Batteries and gas tanks fulfill the same function — storing energy for your next few trips, but a pack of batteries costs hundreds of times more than a single gas tank which holds the same amount of energy.

It’s that weight factor that led most manufacturers to focus on low-end models for their electric cars. Chevy’s Volt and Nissan’s Leaf are both compacts, as was the GM EV-1 of the 1990s.

gm ev-1 electric cars

The EV-1 met a controversial end: General Motors scrapped them all, despite the fact that many owners were willing to buy them at inflated prices and indemnify the auto giant from all liability.

In the years following the demise of the GM EV-1 and Honda EV Plus, green motoring shifted from all-electric vehicles to hybrids, which are powered by both electric and internal combustion engines.

Along Came Tesla

Elon Musk, the founder of Tesla Motors, grasped that electric motors have a much larger advantage over internal combustion engines when it comes to higher-end applications. It appears he thought a high-end electric car can compete much more effectively against its peers than an economy electric. So he first launched a sports car, and then he aimed straight at the heart of the high-end car market — the Mercedes-Benz S class.

The numbers seem to vindicate Mr. Musk. His Tesla S has outsold the Mercedes S-class in 2013 by more than 30 percent:

electric car sales 2013

How Does This Affect You?

At this point, you might say, “Well, that’s all nice and dandy if you can afford cars in that price bracket. I’m not in it, so why does this interest me at all?”

Here are a few reasons:

1. Mr. Musk is planning to move down-market as Tesla develops new models. His commitment is to capitalize more fully on the inherent advantages of electric cars with each successive model. That means the odds are good that Tesla’s lower-end models will outsell their peers making them the new standard.

2. Along the way, electric recharging stations will become more plentiful and the range from battery packs will grow. The world as we know it may well be in for a change.

3. The pressure on the electricity generation industry and the grid will grow. That growing stress may well result in power outages becoming more common … or further the growth of alternative energy sources.

4. We may be witnessing the birth of a new normal, a bit like the Model T created new ways of living, many of which we still take for granted. Because Tesla has opened their inventory of patents for anyone to use, it is entirely possible that the market may become flooded with electric cars which deliver on the full promise of the inherent technology — so it’s not Tesla the company that might change our lives, but the industry it helps to foster and grow.

Changes to the way we live never happen smoothly or without controversy and bumps in the road — and this change likely won’t be an exception to the rule either. However, the sales success of the Tesla S is opening more peoples’ eyes to the inherent superiority of the electric car. Forget the environment; we’re just talking as a car. As technology addresses the battery problem, electric cars will become more and more integrated into our lifestyles.

When that happens, the car you want to buy in the future will move into the sights of those designing electric cars. The question is: When they do that, will you be open to something that different?

Are You Getting Ahead or Falling Behind?

• Debt Reduction•Frugality•Planning•Retirement•Saving & Investing•Working
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People have long spoken of “haves” and “have-nots, ” but perhaps never in modern times has the economy seemed so separated between those who seem to be getting ahead and those who are falling behind.

What complicates things is that appearances can be deceptive. The easy availability of debt can make a household believe it is living well when in fact it is working itself into trouble. Failure to put money toward certain responsibilities can also boost a lifestyle in the short term but leave you facing a big bill in the long term.

So, to help look past that kind of illusion, the following are nine questions that will help you determine whether you are getting ahead or falling behind:

  1. Does your income exceed your expenses? Credit is often so easy to obtain that your lifestyle really does not reflect whether you are getting ahead or falling behind. Don’t confuse getting ahead with simply getting the things that you want. If you are relying on debt to fuel your lifestyle, you are falling behind because you won’t be able to afford that lifestyle indefinitely.
  2. Have you identified how your expenses will grow over time? For the reasons discussed above, living within your means is an important first step toward getting ahead, but you need to anticipate that it may become more difficult as your expenses grow. Things like having kids, going back to school, or moving to a more expensive neighborhood may represent higher expenses on the horizon, as might any variable rate debt, from credit cards to adjustable-rate mortgages.
  3. Is your debt heading toward zero, or infinity? Debt is definitely one of those aspects of financial life in which people are usually either getting ahead or falling behind, with little middle ground in between. It is not enough to be slowly chipping away at debt, because interest expense is always trying to build it back up. Similarly,  continually tapping into home equity means you just keep taking on more interest expense. If your debt is not on track to reach zero within the foreseeable future, you are not really getting ahead.
  4. Are you building your assets? Getting ahead means that the net value of your assets is growing. This includes home equity, savings, retirement funds, etc. Alternatively, people who are falling behind may have assets, but their value is diminishing because they are spending against that value.
  5. Do you save in advance for big ticket items? Certainly, you can borrow to make big purchases like a new car, but that means your subsequent income will be offset by the amount of your loan payments. In other words, you may acquire an asset now, but your budget going forward will be reduced. If you save up in advance, when you acquire the asset your budget going forward will be free and clear of such payments.
  6. How well do you maintain expensive resources? Speaking of cars, things like cars and homes will last much longer if you maintain them properly. In a sense, that type of maintenance helps you get ahead, because it prolongs the useful life of your assets. In contrast, if you use things roughly, you will face a shorter repair or replacement cycle that will cost you more in the long run.
  7. Are you taking care of your health? You can think of your health as similar to the type of maintenance mentioned above. If you are healthy, you will be able to work longer and earn more. If not, you face diminished earnings and higher healthcare expenses.
  8. Is your retirement saving on track to fund your needs? An important aspect of retirement planning is to try to fund your life style once you are no longer working. If you cannot do that, you are effectively falling behind because you face a drop-off in lifestyle in the future.
  9. Are you managing your career successfully? Working hard, keeping your skills up to date, and generally being valuable to your employer and in demand on the job market are all things that could affect your future earnings. If you are not putting a sincere effort into your career, you may be falling behind because it is eroding your future earning power.

Obviously, wealth and income have a lot to do with determining who society’s haves and have-nots are, and not everyone is in a position to control those things. However, how you manage what you do have also matters a great deal, because plenty of rich people have blown their fortunes, while people of modest means have managed to keep their finances on course. So, whether or not you are getting ahead or falling behind is not so much a question of what you have now as one of which direction your finances are heading.

20/20 Vision on 20-Something Investing

• Planning•Retirement•Saving & Investing
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About 35 years ago, when I was new to the corporate world and fired with ambition, but not the least bit fired-up about staying with my big corporate employer, I had a series of bewildering conversations with colleagues, many even younger than I.

See, the place where I worked had long been the number one name in its field, and that status conferred a certain sense of stability. So when I talked with co-workers about what job they expected to jump to next, where they intended to go professionally, and what bold new career worlds they hoped to explore, many responded in very clear terms that they had no intention to go anywhere.

“There is such a feeling of security I get from having a job with an industry leader, ” I was assured by one 21-year-old with nearly a half century of career ahead of her. “If I left this company and went someplace else, I’d be throwing away the security that I always, always would have a job.”

This comment would prove akin to someone in the port of Southampton in 1912 reporting, “Traveling across the Atlantic on most vessels is risky. So I’m setting sail on this one — this unsinkable Titanic!” But the irony in my co-worker’s pronouncement wouldn’t be fully evident until quite a bit later.

One to two decades after the preceding discussion, this household-name employer fumbled away its number one status in its industry and became an also-ran. Today, with another two decades of water under the bridge, the company has become a punch line. It is a shadow of its former self and frequently turns up on the lists of once-mighty corporate giants predicted to pass from the scene within the next 12 months. The department to which I was assigned was eliminated at least a generation ago, along with all the employees who once toiled by my side. Some of my ex-colleagues had been promoted out of that department by the time it was shuttered. But at last check, even the most diehard had moved on to new employment opportunities with companies that aren’t corporate cadavers.

Shred the security blanket

The example underscores the fact that seeming Rocks of Gibraltar can crumble, and other entities that appear ephemeral have a way of growing huge and powerful and lasting. More, spending your 20-something years counting on the world never changing will likely leave you very unhappy and may also consign you to the poorhouse.

That’s why I don’t recommend anyone in their 20s with decades ahead of them be conservative and security-minded. Too much can change over your lifetime; and if there’s any life stage where you want to take on some risk, it’s when you have the luxury of four decades to undo any damage your youthful moves inflict. Sure, study savings account rates and seek a high-yield savings account, but also research and invest in higher-risk, higher-return instruments.

Evidence that this wisdom hasn’t been absorbed by today’s generation of 20- and 30-somethings arrived recently in a survey by Fidelity Investments. It found that those born between 1978 and 1988, known as Generation Y or Millennials, appear to select cash as a favored long-term investment. That’s a concern because Fidelity found that the largest projected gap between what they will have and what they will need in retirement is experienced by Millennials.

The survey discovered Baby Boomers born from 1946 to 1964 are on track to reach 81 percent of their retirement income needs, by and large. That percentage falls to only 71 percent for Generation-Xers born from 1965 to 1977. Millennials are projected to have the largest income gap at 62 percent, Fidelity found.

Regardless of the generation, Americans aren’t saving enough, Fidelity learned. As a whole, 40 percent of those surveyed saved less than 6 percent of their work income, a number far lower than the 10 to 15 percent recommended by financial experts. But for Millennials, the percentage saving less than 6 percent isn’t 40 percent. It’s 51 percent.

The survey also revealed that younger people are taking far too cautious an approach to investing. Of Millennials surveyed, half said they had less than 50 percent of their investment assets in the stock market. In reporting the survey, Fidelity noted that the rule of thumb is for 30-year-olds to have up to 90 percent of their portfolios in the asset class of stocks.

Evidently, Millennials are eschewing the market. That despite the fact that if they’d checked, they’d notice the S&P 500 has gained 17 percent over the last 12 months, while most cash investment yields are south of one percent.

And that’s also despite the fact that if they’d been paying attention, they would have noticed that virtually every expert advises young people to be in the market. After all, they have the time horizon to weather the stock market’s ups and downs. What’s more, over time, inflation will chew up and spit out their meager earnings in CDs and similar cash investments.

Risk in pursuit of security

Perhaps I should restate my observation of above. Your 20-something years are not the time to forget the goal of security and stability; rather, it is the time to be embracing a reasonable degree of risk as a way to ultimately achieve security and stability.

Of course, it’s possible you might be afraid of the stock market, and consider cash much safer.

It’s also possible a traveler in May 1937, looking to avoid the fate of Titanic passengers years earlier, assured friends and family he’d chosen a much safer mode of trans-Atlantic travel — the Hindenburg.

Do You Know About This Movement?

• House & Home
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Is there a new movement happening in your backyard that you are unaware of? A new reality television series has probably never been the impetus behind a major change in how we live, but could this one be different? The show in question is called “Tiny House Nation, ” and it kicked off earlier this month on FYI, an A&E cable channel.

There is a growing interest in the movement, which goes by many names, like “small houses, ” “micro-homes” and the ever more popular “tiny homes.” There are as many definitions of what a tiny home is as there are definers. Everyone agrees it’s smaller than about 700 square feet of living room, but most high-profile-tiny-home advocates celebrate postage stamp homes: less than 250 square feet.

Now, just about everyone who has left home and struck out on their own started with a small apartment not much bigger than the aforementioned 700 square feet. However, the general attitude always used to be: This is a place to be coming from, not going to. The fact that you could live there didn’t mean that you wanted to live there forever.

That attitude is starkly visible in the data. From these Census Bureau numbers, you can see how Americans have disdained smaller homes (orange line) for what has become known as “McMansions (blue line):

large vs small homes

The numbers clearly show that the tiny home movement hasn’t gone mainstream just quite yet. However, that might be changing. If you look at popular mainstream media, from NBC to Huffington Post, you’ll observe more and more discussion of the tiny home movement, usually with the breathless proclamation that this could be the next big thing. There is also, as you would expect, a growing chorus of blog sites dedicated to the phenomenon, from purely talk to help-for-pay.

Why?

What prompts the sudden interest in what most people gladly left behind?

1. Cost

According to the Census Bureau, the typical cost for the average house of over 2, 000 square feet is well over $250, 000. In contrast, the average cost of a tiny house is less than one tenth of that.

2. Debt

Mortgage debt is the number one form of debt in America today, and it amounts to over $13 trillion, or about $100, 000 per household. In an era when the American Dream seems to be fading for many, getting out of debt is acquiring a compelling attraction, and what better way to get out of debt than to shift your thinking about your living quarters?

3. History

Until the 1950s, most houses averaged around 1, 000 square feet. Tract homes were introduced in the ’50s and dropped the cost of housing considerably. That, and the availability of mortgage debt, soon enticed most Americans to increase the square footage they live in (and mow) to where it is well over 2, 000 square feet, not counting garages.

The fact that millions lived quite well, for so long, in 1, 000 square feet is beginning to resonate with an increasing portion of the population. If it’s been done before, it can be done again, only this time with better planning and gadgets.

4. Environmental Impact

More people are becoming aware of the burden unnecessarily large homes impose on the planet. The main item is energy consumption; but it extends to other items, too, like materials used in construction and water usage. The smaller the house, the smaller the footprint (literally) on the environment.

Why Hasn’t Tiny Housing Taken Off Yet?

The environment may appreciate a switch to tiny houses; but the environment, unfortunately, doesn’t have its own bureaucracy, banks and code. We live in a society built to accommodate the status quo, and any new innovation has to either comply with legacy requirements or wage an uphill battle to get taken seriously.

So, why is the tiny home movement not being taken seriously yet?

There’s no pressure

During the Great Recession, a few more people were motivated to scale down their housing than usual. You can see both the blue and orange lines in the chart above leveling out during that dark period. However, as soon as the economy recovered, America returned to its McMansion ways and continued building fewer small homes and more mini-castles.

Cars didn’t become more fuel-efficient until the oil crisis of the ’70s, and it seems the tiny home movement will need some external event to give it a significant boost in awareness and popularity.

Ignorance

Most people are simply not aware how advances in architectural planning have enabled us to live comfortably in a smaller footprint. Most of the tiny homes featured in TV and magazine articles are extreme: 200 square feet or less. That might cause many to nod in agreement; but few would change their habitat.

However, in order to make those microscopic homes habitable, owners and architects have come up with ingenious solutions. Simply by applying those inventions, it would be possible to make a 1, 000 square foot home as livable as a McMansion. However, until the majority of home builders and buyers become aware of these innovations, their widespread adoption will languish.

Bureaucratic hurdles

Any government is a reflection of its people and their culture. In a culture of growing homes, it is not surprising to find that local governments and banks both tend to associate small homes with poverty and blight. As a consequence, when you attempt to get permission to build your little 300 sq. ft. marvel of architectural ingenuity, you’re likely to run into a bureaucratic brick wall.

The way most tiny home builders are getting around this hurdle at the moment is to build their homes on trailers. That makes a home a non-permanent structure, which doesn’t need to comply with any codes.

That immediately raises the question: Why not simply live a motor home or travel trailer, then? Most RVs are designed for temporary vacation types of living. Their layouts are not designed with permanent living in mind, and they choose construction materials for weight saving, not durability. But, more than that, a motor home simply doesn’t “look like home.”

Conclusion

Reading about the tiny home movement and watching the TV show is, at the very least, entertaining and educational. If you are really serious about cutting your expenses and getting rid of debt, a tiny home is a doable alternative. That’s not to say it’s an approach without sacrifices and compromises.

But what good things in life are?

What do you think? Is this just an oddity, or a portend of something as profound as compact imported automobiles turned out to be?

Why Do You Shop?

• Consumer
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A few years ago, I was living paycheck to paycheck and was seriously trying to get my finances under control. I read all the tips and tricks to curb spending, yet I was failing month after month. I didn’t understand what I was doing wrong. I never entered the grocery store without a list; I never bought expensive, brand name shoes or purses; I never obsessed with changing my wardrobe based on the season. On the surface, I never had any problems — but, at the end of the month, I always ended up broke. Finally, after a lot of agonizing over various revisions of my budget, it hit me: I didn’t have a budgeting problem; I had a shopping problem.

I shopped when I was feeling angry or stressed out. I shopped to get along with my roommates. I shopped to make me happy. I shopped to take advantage of sales. I shopped because I felt the need to own stuff. I shopped to relax.

We like to think we make rational decisions and buy only things that we need, but we don’t. We shop for a lot of reasons.

  • Shopping to belong
    Keeping up with the Joneses or trying to impress others stems from a deep desire to belong to a community, to be seen as part of the group, or to establish and maintain a connection with our friends. Sometimes shopping becomes the only way of socializing; other times, we feel the closeness we crave simply by buying the same brand or following the same shopping principles.
  • Shopping as a mental vacation
    Often, we shop to relax or decompress. I know plenty of people, including me, who categorize shopping as a stress reliever or find it soothing. For some, it is a mindless activity that is also pleasurable. Strolling through the mall in search of the latest fashion and buying something nice for ourselves is a great way to relax.
  • Shopping as a challenge
    Some people take it as a challenge to find the ultimate bargain. “Beating the system” becomes a game of knowing when things go on sale and matching up the coupons. Hunting the clearance rack gives them a sense of accomplishment. They don’t really think about whether the items they buy are necessary.
  • Shopping for dreams
    Some of us shop to give us hope that one day we might be able to afford things we’ve always dreamt of owning. We buy things to inspire. I have five cute tops that I want to wear when I lose weight. We also buy things to make us feel that we have done something to achieve our dreams. I will say, in a very embarrassed voice, that even now when I try to change my habit, say to start exercising, the first thing I think about is to buy new running shoes or go grocery shopping for healthier food.
  • Shopping as an emotional need
    This is closely related to the mental vacation shoppers, but the subtle difference comes from the fact that we don’t just shop merely to relax, but to feel empowered, more confident and more secure. Shopping can be an outlet for a plethora of emotional needs – confidence, adventure, security, self-esteem, anger, pleasure, freedom.
  • Shopping for stuff
    These shoppers simply feel the need to own stuff. They buy to fill an undefined sense of emptiness. Buying new things gives them short-term happiness to fill the void.
  • Shopping for experience
    This is a recent trend: experience vs stuff. Out-of-control spending on experiences is as much a problem as spending too much on stuff. Shoppers of experiences often go into debt to travel or to live a more adventurous life.
  • Shopping based on influence
    Some as-seen-on TV products feel like a slice of heaven. When you see a demo, it makes you wonder how you managed all these years without it. Add in a sense of urgency to “call within the next 10 minutes” to get an extra trinket is a perfect shopper’s trap.
  • Shopping for things we deserve
    Some shoppers feel they deserve to have certain things in life because they work hard.
  • Shopping as a self-definition
    I defined myself based on what I wore or how I dressed during my teen years. Even now I feel the need to dress in a certain way based on the impression I want to give out to other people. Logically, I understand that what I wear does not define who I am as a person, but we do like to have our signature style or a signature perfume.

There are plenty of tips online to mitigate the urge to splurge, but the most comfortable and sustainable solution for me to get my shopping under control was to understand the underlying issues that led to each of my purchases. We no longer live paycheck to paycheck, but I still need to evaluate my purchases periodically to make sure I don’t fall off the wagon.

Have you ever thought about your shopping habits? Why do you shop? How do you keep your shopping habits in check?

Who’s the Boss of Your Finances?

• Planning
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When it comes to financial decisions, do you feel like the boss or like it’s your first day on the job?

If you don’t feel in command, it’s understandable. Millions of people with no background in finance are called upon to make a series of very important financial decisions: making a budget work, saving for college,  financing a house,  planning for retirement, strategizing on investments, etc., etc.

Many find this responsibility intimidating — and unfortunately, that sense of intimidation can contribute to poor decisions.

It helps to learn a thing or two about finances; but even before you do that, a little attitude adjustment can increase your chances of financial success. You have to resolve to take control of your financial situation, and there are several ways you can act on this resolution.

People don’t feel in command of their finances

The National Foundation for Credit Counseling (NFCC) polled people on how much command they feel over their financial decisions by asking them to describe themselves as if they were playing a role in a corporation. Here are the results:

  • Just 8 percent felt in command enough to describe themselves as the CEO of their finances.
  • 30 percent felt some degree of confidence, describing themselves as middle managers on their way up.
  • 35 percent saw themselves as entry-level employees just trying to catch on.
  • 26 percent felt overwhelmed and wished they didn’t have the job.

In other words, more than half of those surveyed (the last two categories of respondents) did not feel in command of their finances.

The need for confidence

This lack of confidence in the ability to make financial decisions becomes a self-fulfilling prophecy. When people lack confidence, they tend to make bad decisions. Here are three significant ways that a lack of confidence damages financial decision-making:

  1. Avoidance. The failure of many people to do even rudimentary retirement planning is not simply because they didn’t get around to it. Consciously or subconsciously, people tend to avoid getting started on tasks they feel are going to be too difficult for them. Because people lack confidence in their ability to take on retirement planning and other major financial decisions, they ensure failure by never even getting started.
  2. Acquiescence. You may deal with a number of financial professionals in your lifetime — bankers, investment advisers, planners, etc. Most of them will probably know more about the field than you do, and many of them will have something to sell. That’s a dangerous combination. It leads to consumers agreeing to sales pitches simply because they don’t feel qualified to disagree.
  3. Indecision. People get whipsawed by financial market volatility. They open up an investment account in search of higher returns, but then pull back when they start losing money. They only get back in when the market has climbed back up enough for it to feel safe. This failure to choose a course and stick with it leads to bad investment returns, and bad financial decisions in general.

In essence, the lack of confidence reflected in the NFCC poll results stems from the feeling that you don’t have command over your finances. You need to counter that by actively taking control.

Taking control

Here are seven ways you can act more like a CEO than a trainee, and take better control of your financial situation:

  1. Don’t let anyone pressure you. The more someone tries to make you feel you have to take their recommendations or act within their deadlines, the more you should make it clear that you will make your own decisions on your schedule.
  2. Don’t accept an answer you don’t understand. People feel intimidated when they don’t know as much about a subject as the person talking to them, and financial salespeople count on this. Remember, the boss does not need to know all the technical details. Keep asking about the essentials until you know enough to make a decision.
  3. Talk it through. Good bosses seek input and feedback before making a decision. Talk your financial issues through with your spouse, peers, or mentors both to get ideas and to test your thought process.
  4. Don’t take comfort in other people’s failings. Sure, plenty of people have made a mess of their finances, but you shouldn’t use this as an excuse to make poor decisions as well. Leaders lead; they don’t try to hide in the crowd.
  5. Stay informed. Rather than try to gear up for a decision every once in a while, it helps to keep regular track of your finances and the broader economic environment.
  6. Analyze mistakes. Don’t hide from your errors. Own them and learn from them so you can avoid them in the future.
  7. Repeat successes. Don’t chalk success up to luck. Instead, figure out what you did right and make that part of your process.

Contrary to how people in the NFCC poll feel, you are the boss of your financial situation. You owe it to yourself to start acting like it.

Silence Not Golden in Intergenerational Family Finance

• Family & Life•Insurance•Retirement•Saving & Investing
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The last time I ran into one of my favorite cousins, the conversation soon turned to which far-flung family members she had recently heard from. She divulged she hadn’t yet heard from my youngest cousin, her younger brother, about his recent trip to Southwest Michigan. That was not new, as she’d called another of my cousins, her older brother, two weeks earlier and had yet to hear back.

“Have you heard from my sister?” I asked.

“Nope.”

“Has my sister heard from you?”

“Nope.”

“Has Uncle Bill heard from Uncle Jack?”

“Nope.”

“Has the cat heard from the dog?”

“Nope.”

“And vice versa?”

“Nope.”

As you can tell, the family is not the best at keeping communication channels open. But I’m not sure that’s a serious charge, because that issue appears to be a pain point for many families. And from what I gather, lack of communication is never more acute than when it comes to discussing money issues.

This was reinforced during a recent lunch with one of my editors. Her mother is in her 70s, the editor said, very sharp and youthful. But she will not discuss cash. I commiserated, recalling for her my first attempt to talk with my dad about family finances, and what specifically might happen in the event of his passing.

His response to my conversational overture was to take me to task for waiting so long to bring up the topic. Then he clammed up to a degree that would have made Marcel Marceau appear chatty. He uttered virtually nothing for years about wills, trusts,  savings accounts,  insurance policies, retirement accounts, pensions, home value, powers of attorney, living wills or burial wishes.

Cat’s got their tongue

Vanguard Financial Advisor Services recently took a deep dive into this issue of non-communication between family members regarding finances.

In Vanguard’s Investment Commentary podcast series, Kristin Barry of Vanguard Financial Advisor Services revealed “two-thirds of boomers have disclosed little to no information about their wealth to their children.” What’s more, only about half of those working with financial advisers have formulated any plans to get their family members talking it up with their financial advisers.

Not long before, Fidelity Investments had also commissioned a study of this topic. The Fidelity Intra-Family Generational Finance Study Executive Summary examined the attitudes among more than 1, 100 U.S. parents and their adult sons and daughters.

Among the key findings was that young adults experience emotional and financial stress resulting from lack of communication with their parents. Almost seven in ten parents and six in ten of their adult sons and daughters say they are more comfortable talking with third-party financial professionals than one another. And while almost 19 in 20 (94 percent) of parents and their adult offspring agree on the importance of having explicit discussions about wills and estate planning, those conversations often end up exhibiting, to paraphrase Dorothy Parker, all the depth and clarity of a mud puddle.

The result is a predictable inter-generational disconnect on all manner of things familial and financial. For instance, adult offspring underestimate the value of their parents’ estates by more than $100, 000. Almost 97 percent of older adults say they will not need help from their children, while almost one quarter (24 percent) of adult sons and daughters anticipate having to help their parents.

The number one reason parents cite for not conversing on retirement plans with adult sons and daughters (cited by 30 percent of respondents) is that they don’t want the younger folk to depend too much on inheritances. Meantime, the top reason cited by the younger generation (40 percent) for the intergenerational silence is that their parents’ money concerns really are none of their business.

Even the issue of the timing of financial conversations is fraught with discord. Ninety percent of parents and their adult offspring agree such conversations are important, but only about 30 percent agree on when they should be held. A much higher percentage of adult kids than their parents, for instance, believe talks should be held before the older folks retire.

Talk it up

There are significant benefits to breaking through the impasse and opening the lines of clear communication. And they go beyond money, Fidelity says.

More than 85 percent of older adults reported they enjoyed increased peace of mind after having detailed conversations with their adult offspring.

Clear majorities also stated that they felt those detailed discussions benefited the adult sons’ and daughters’ emotional state (67 percent) and financial future (61 percent), and also were likely to result in improving the financial lot of the grandchildren (52 percent).

To break through that taboo about talking money with family members, the Vanguard Podcast recommended a few different strategies. One is to start the talk without any actual dollar figures bandied about, which may have a way of loosening up everyone’s tongues. Another is to encourage a more educational exchange, in which older family members offer insights on getting the most from savings, or juggling marital and financial differences, as a way of easing into heavier money talks.

Talking about money with family may not be the easiest thing to accomplish. But managing a substantive conversation on the topic can help make everyone feel better, and that’s worth a lot.

Who said talk is cheap?

The Cost of More

• House & Home
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We have become a nation of “more is better.” We want more of everything — more toys for our kids, more cars in the driveway, more shoes in the closet, and more bathrooms in the house. Our houses, garages, dumpsters and lives are filled with Stuff. With a toddler around, I’m very tempted to fill the house will cute clothes and fun toys. Sometimes I stop for half a second to consider the cost of buying something, but I often don’t consider the true and total cost of “more.”

Purchase price cost

First, of course, there is the actual cost of buying the item I want. Sure, I shop around to compare prices, but I often forget the sales tax. For some objects, such as cars, this can be significant. Then there may be additional insurance costs as well — replacement value for that new piece of jewelry, for example. Of course, we pay off our credit card every month; but if you don’t, there will be some interest charges and late fees for that new item as well.

Opportunity cost

Even if I get the best deal in town, pay cash and don’t have other charges on the purchase price, I lose the opportunity to use that money for something else. Even the filthy rich can’t afford ALL of the things they want ALL of the time and have to make choices. My choices would be to delay using that money, saving it or investing it, so that it would earn interest or dividends for us in the future.

Maintenance cost

Once I have that item, I need to take care of it. Some things require more maintenance than others but all require some. Maybe it is an art object that has to be displayed and dusted once a week. Maybe it is a motor vehicle that requires oil, gasoline, tuning and service occasionally. Whatever the item, there will be some kind of cost to maintain it.

Time cost

If you are a smart shopper, you spend time comparison shopping to get the best price. For items less than $20, I don’t spend a lot of time. If it is more than that, I spend quite a bit of time comparison shopping; sometimes I even obsess about it until I buy. If I am buying used, I have to spend time to locate the item, negotiate and go pick it up.

I also spend time dealing with the results of “more” — picking up all those toys my daughter spreads out every day. The more choices she has, the messier the house becomes; doing the maintenance mentioned above; figuring out how to discard the items when you no longer want them, etc.

Storage cost

The more I have, the more space I need for storage. We moved into our current 2, 400 square foot home a year ago. When we moved in, it was practically empty — large open spaces, lots of closet space, only cars in the garage with lots of space to move around even after storing the things used once a year.

Now, after just one year, we have so much Stuff, we could never go back to our 700 square foot apartment without getting rid of a significant amount of it. At least I am not wasting money renting storage. I used to rent a storage space paying $70 a month. When I was cleaning it out after having it for one year, I calculated the value of the items in there. It was less than $1, 000. I pretty much wasted a thousand dollars to store Stuff worth a thousand dollars. When we get storage, it is with good intentions. I told myself that I would only be temporarily storing it for a month, until I had a chance to sort through the Stuff. One month became one year. For some people, it goes on for years.

Emotional cost

Stuff bogs you down. You can’t leave your home without worrying that someone will break in and steal all your good Stuff. You get attached to it and can’t part with it, especially if the Stuff happens to have precious memories attached to it.

Stuff gets in your way. Your home becomes so jam-packed that you can’t move around freely. You have trouble getting to (or even finding!) that certain thing that you know you have and need to use. One of the reasons we go out so much to eat is because I don’t find my dining room relaxing with so much Stuff lying around. Needless to say, restaurant spending is one of our major budget busters.

Have you considered what the Stuff you buy is actually costing you?

5 Creative Backyard Summer Activities for Kids

• House & Home
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This post comes from Rachel Beger at our partner site Zing!

School’s just about out for the summer, and that can only mean one thing: “Mom, I’m bored!” Ideas run out fast, especially when you’re not looking to leave the house every day, and you have a budget to abide by. These five backyard activities will be your summer survival guide when boredom sets in for the kids and you don’t have the time or budget to come up with fun things to do.

Outdoor Twister

Twister is a classic game that’s fun for the whole family, but setting up the mat outside can be quite difficult when wind and slippery grass come into play. Instead of using the mat the old-fashioned way, spray paint the round circles onto your grass.

You’ll need either a piece of poster paper, a large piece of sturdy paper or even a brown paper bag to create your circular stencil. Next, take a round object with about an 8-inch diameter (e.g. plate, bowl, bucket, oatmeal container), and trace the object onto the paper. Cut out the circle, and you’ll be left with your stencil.

Once you’ve created your circular stencil, lay it on the grass and begin to spray. You probably won’t want to let your kids do this due to the toxins in spray paint. The typical Twister mat has 24 circles, six of each color. The circles should be around 3 inches apart. To play the game, use your spinner from the original game if you have one. If not,  make one with paint chips.

Interactive Driveway Board Game

Revamp your board game days by creating an interactive board in your driveway. No pieces, no problem! Kids will be their own game pieces in this game.

First, you’ll need to make the board. Using chalk, kids can draw out a long, winding path with a start and a finish, creating as many spaces as they want. Older kids may want a longer board and younger kids a shorter one, depending on their attention span. Randomly write “+3, ” “-2, ” “+5” and “-7” on the board, leaving about a third of the spaces blank.

Next, you’ll need some giant dice. Here’s how you can make your own!

  • Take an empty, cube-shaped tissue box and cover it in newspaper or durable paper.
  • Color on all the dots of a piece of dice with a marker.
  • Tape all the edges with postal or duct tape to ensure durability.

Now that you have your game board and dice, you’re ready to play! Each player rolls the dice and moves that many spaces. If you land on a space with a plus or a minus, you’ll follow the space’s command (for instance, if you roll a 2 and the space you land on says “-3, ” you’ll move back three spaces). Players can only move forward or backward once per roll. First player to the finish line wins!

Homemade Bubbles

Blowing bubbles is always good for a few smiles, but it doesn’t exactly scream “summer excitement.” Mix up your own homemade bubble concoction and get creative with your bubble blowers.

Homemade bubble recipe:

  • 4 cups of water
  • 1 cup of dish soap
  • ¼ cup of corn syrup
  • Empty gallon jug and wide plastic container

Get creative by using household items to blow bubbles. Cookie cutters are easy to use, or get more advanced and create your own shapes with colorful pipe cleaners, copper wire or a water bottle. To use a plastic water bottle, cut off the bottom of the bottle with a good pair of scissors (adult supervision recommended), then dip the open end into the bubble solution and blow through the mouthpiece. This will be a great activity to get the kids off the couch and outside in the sunshine!

Outdoor Bowling

Going to the bowling alley in the summer usually means one of two things: rain or dangerously hot weather. Here’s how you can enjoy the timeless game even on a nice summer day!

What you’ll need:

  • 10 empty 2-liter bottles
  • Food coloring
  • Water
  • A soccer ball, basketball or other large ball

Once you’ve filled all your 2-liter bottles about halfway full of water and food coloring, find a flat area of grass or a driveway to set up the game. Arrange the bottles in a triangle. If you choose to play on a driveway, you can draw lines to symbolize the gutters of the lane. Depending on the age of the children, you can make the fault line as close or far back as needed.

Most importantly, this fun activity involves little cleanup: Just store the bottles in the garage for the next time the kids want to play!

Glow-in-the-Dark Ring Toss

Enjoy warm summer nights with this glow-in-the-dark game of ring toss.
All you need are glow sticks and a stand. If you don’t have any glow sticks in the house, Walmart sells a 100-pack of assorted colors for $10.48.

No need to go out and buy a metal post to stick in the ground; search your house or garage for something that will work. Try using a small shovel, an outdoor solar light, a large stick, a 2-liter of pop or anything stable and tall enough.

How to play:

  • Form teams of two and give each player three rings (the teams should each have a color).
  • Have one player from each team throw a ring, and rotate.
  • After all of the rings are thrown, count how many are on the stand from each team.
  • The team with the most rings wins!

I hope these games help occupy some of those “I’m bored!” moments you encounter this summer while your kids are out of school. Enjoy!

Know of a creative and fun outdoor summer game for kids? Post it in the comments section below!

More stories from Zing:

Five Feng Shui Tips to Help You Sell Your House

Tips for Transitioning to Dorm Life

The History of U.S. Money

What to do When the Stock Market Crashes

• Saving & Investing
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The Dow Jones Industrial Average index hit 17, 000 in the last week — a new record — and the S&P 500 Index followed suit. As is usual any time a stock market record is reached, the boo-birds make their appearance. “This is it!” they cry. “This is too high; a crash has to follow.” Well, something like that.

Of course, the boo-birds are right about one thing: The market always falls after it reaches a record high. The only problem is the market doesn’t drop immediately after each new record is set. It keeps going up … till it eventually does fall.

It always does. The history of the economy and the stock market are replete with cycles of booms and crashes. If you want to see a chart of the economy, you can click this link. The stock market cycles have the same wavy appearance. Both have the ups and downs we’ve become accustomed to, at least intellectually.

Why do you care about the stock market, especially if you are not a stock trader or investor? Most Americans’ retirement funds, be they in pension funds, 401(k) plans or IRAs of various descriptions, are tied up in stocks, directly or indirectly. You may remember how the Great Recession impacted those quarterly statements you received in the mail. So, whether you are active in the stock market or not, chances are it affects your wealth.

What do you do?

In general, there are two broad answers, depending on how close you are to retirement. If you look at the stock index chart in the link above, you’ll notice the time between peaks (and valleys) usually is around ten years. That means if you hang around and do nothing for ten years, more or less, you’ll find yourself having recovered all of the losses a crash would have inflicted on you.

That makes ten years a good cut-off point when considering your options:

More than ten years from retirement

Do nothing. Well, not nothing. You actually keep on investing. Warren Buffett, the world’s most successful investor, loves the periods when the market is down, because he always buys. And when the market is down, all his purchases are bargains. If you look at it like that, it makes sense.

The problem is that it’s hard to look at it like that. Why? Because we’re psychologically wired to feel good — rich, even — when we see the value of our home and investments go up.

But you shouldn’t, for two reasons:

1. The gain in wealth is unrealized. That means it’s not cash in your hand. And, as we all know, what goes up can come down. The only value that matters is the price when you sell.

That often leads people to sell assets when their value has gone up, “to lock in the gain.” There’s a problem with that, though: What do you do with that gain you locked in? If you sell your home, you need to buy another one. If you sell your bonds and stocks, what do you do with the proceeds? Chances are you’re not going to blow it all on a cruise around the world or a long weekend in Las Vegas. You need to invest it somewhere else.

Therefore, there is nothing to feel good about when you hear the value of your home or investments went up, unless you have a better thing to invest it in if you sell.

2. It’s a temptation to waste money. So you feel rich when you see the value of your home and investments soaring. But your daily grind continues unchanged. That creates a tension within you: “How come I still have to grind my little behind off, day after day, putting up with all the crud at work when I’m getting rich on my investments?” Maybe your car is giving you trouble. Maybe your home appliances are beginning to cost money. Maybe your clothes just feel old and out of style. This tension between the unchanged daily grind and the reports telling you you’re getting rich has many faces.

But those faces usually all lead to the same temptation to spend money — buy a new car, a nicer home or new clothes, go on a shopping spree or a long-deserved vacation. That’s right. We start using the “deserved” word a lot more when we see our net worth going up. (Funny, that in a recession, we don’t feel we deserve anything and we’re happy just to keep our jobs, or get one if we got laid off.)

The bottom line is that, unless you plan to retire in the next few years, just keep on going on with your investing. If anything, try to invest more when prices drop.

Less than ten years from retirement

This gets a little trickier, because the odds are that the stock market will not have recovered by the time you retire.

However, if you think about it, what are the chances you’re going to liquidate your entire life’s savings the very day you retire? Small, I’ll bet. You will be much more concerned with the monthly cash flow to cover your expenses. That means dividends and interest.

If dividends are your main interest, you are (again) unconcerned with the movement of the stock market. If, for instance, you have invested in Dividend Aristocrats, your monthly income is safe. It doesn’t matter if the stock market drops because those are stocks which have paid increasing dividends for more than 25 years. In other words, they have proven their stability by paying growing dividends through at least two prior recessions.

In other words, if you are getting close to retirement, the focus of your investments should be shifting to stocks (and other investments) which will provide you with the monthly cash to meet your needs.

And, if you do that right, you won’t have to worry about the stock market dropping.

We know the next stock market crash is coming soon. Just how soon, nobody knows. But, whether you’re retiring soon or are still a ways away, there is no need to panic when that happens.