Ur-gent! Ur-gent! Emergency!

[UPDATE 3/25/05: At this time it appears that my fears of the story below has not come to fruition. However, this story shall stay as a testament to the fact that it could happen to anyone.]

My Financial Flak Jacket Sustains Damage

When I started this blog I wanted to let you know that I would be as honest and upfront as I could. I didn’t lie. The following account is based on a true story—in fact, it’s really not a story at all. More like a recalling of a recent stupid error on my part.

Recall earlier when I wrote about getting a large tax refund and starting a high yield savings account with ING. (Emigrant Direct is also a great way to put money away). I resisted the urge to splurge—even a little, until my emergency fund was complete. I was thinking on what to write about next as I made my trip to Manhattan Total Health, a great Physical Therapy joint for my ailing back. I started back in February and was making regular trips (in fact, this was my sixth visit).

Checking my mailbox in the lobby that night, received two letters from my insurance company and opened them. Each one contained a check for 112.00 and another for 87.50. I wondered “Wow, what is this for? Last year?” Then I flipped the letter open.

Patient Responsibility: $638.00

I blinked, wondering “I owe $638.00 to whom!?” The next check said I owed $37.50. Confused, I contacted the health company the next day and found out that Manhattan Total Health was “out-of-network” and that those checks were to go to them—further more, I owed even more money for other services they hadn’t processed yet—insurance only covered at most 70% of those services. Going online, I discovered I owed over $2,000 to them that have to come out of my pocket, even after insurance.

Floored. That’s all I could think. Well there were other words, but they’re not necessary to reprint here. $2000! I’ve never paid $2000 at any time—to anyone! I entered panic mode and began digging for my credit card. Then my shoulder angel appeared:

“You have an emergency fund. This would constitute an emergency.”

“But I just started it!” I thought. I calmed down, and a cooler sense of saneness re-entered.

However, it would have to do for now. This goes to show that unexpected charges will surface. This also shows that I don’t know everything, and even smart people make mistakes. I now have a working definition of “out of network expenses.” I learned the hard way. Troubles will come my friends, so be prepared. My Financial Flak Jacket has taken some hits in a very short period of time--and I now have to get a new one. Build an emergency fund from cash, not credit, and you’ll be just fine. If you're hit, it’ll hurt a little, but at least you’ll survive without signing over your life to the Credit Card Mafia.

A Hard Look at You, Your Company, and the Government: Part I

All generations have heard about the “good old days.” However, if they were right about one thing, it was about the value of hard work and how companies rewarded hard work at the end of a long-term career with this thing called a pension, where companies would pay you money for a certain number of years after you retire from the company, based on service. I talk about pensions in the past tense because unless you work for the federal/state government, the railroad, or the military, chances are that you won’t be getting one. My company stopped direct pensions for the most part in 1988 for the 401k option instead. Others are following.

Now, here are some realities that you’ll have to realize:

1. The Government Ain’t Comin’

The U.S. Government might provide you with some Social Security when you retire. I wouldn’t count on it though. Social Security hasn’t been managed well because successive governments have been borrowing against it. Now, dear reader, unless you were born before 1975, chances are you won’t even get all your benefits when you retire—meaning you won’t get all the money you put into the system, if any. So don’t expect to work until you retire without saving significantly and then “expect” the government to fund your retirement—it’s not gonna happen. Get it in your head. I mentioned before why you shouldn’t let the government handle your tax refund, imagine if you handed them your retirement options to handle.

2. Retire Early at Your Own Risk
"I’m going to start my own business…"

How many times have you heard your friends crack out that gem? I’ve never felt comfortable saying it, because I have no business plan and no start up cash. Maybe I will, but I’m not banking on it. My current plan is to save a certain amount every month until I have enough to retire on. Many of you have determined to retire at 35, which seems like an arbitrary number if you ask me. Why not 36? Or 34? I don’t see a reason to retire at 35 when the average healthy person lives to at least 80. Are you prepared to support yourself on an unsteady income for the next 45-50 years after you retire? With only 10 years of work?

OK, let’s say after 10 years you’ve retired with 1 million in the bank. What then? Do you stop working? Let me tell you, life would get pretty boring after about the third trip to Europe—it’s just like the third trip to Six Flags. Gets kinda boring pretty fast. It can also get expensive when you don’t have new income to back it up. Annuities can only bring in so much income. And when you include inflation and cost-of-living, you may find yourself reporting back to work at 45.

And that is just not fun. Imagine the possibilities:

Think about it: Bill Gates, Oprah, Warren Buffet—they’re billionaires. Why haven’t they quit their jobs? Truth be told, even millionaires who’ve earned their money (not lottery folks) worked years to build up their income and spent sleepless nights doing it. Even pro athletes tend to have a strong work ethic? Why quit so soon? We’ll talk about it in Part II, next week. Comments, criticisms, and different points of view are allowed of course, in the Comments Section. See you next week.

Got A Huge Tax Refund? Shame on You!

I see you out there, scholars. You ooze sophistication. You don't run from numbers. Being a technical science or engineering major is your life. You smile at the ease of filling out your own taxes on the internet. A week later, you feel good have that $1500+ refund check in the mail. It's time to shop--you've earned it, right? Or maybe you'll invest it, or save half of it.

Silly you.

Shame, shame, shame!

Believe it or not, you just fell victim to the classic ankle-grabbing government..er.."servicing." But you're not alone. I've been served myself. But never again.

When you get a chance, re-check the size of your last refund. Any amount over say $50, is too much. You just gave the Gub'mint an interest-free loan. Why? Probably the same reason I did--I didn't know any better. I was so thrilled to get my $2400 refund--not truly realizing that it was my money to begin with--that they held all year.

$2400..that's $200 extra per month, $100 per paycheck. Now let's say that instead of sending that extra money to the same entity that handles funding for Katrina, you instead you have it directly deposited into an FDIC-insured ING Orange Savings Account that's connected to your checking account. (I'm doing this now.) , with a guaranteed return of about 3.5 - 4% per year. (Wachovia, Bank of America, Washington Mutual, and other bankshave savings accounts that are also FDIC-insured but earn less than 1% per year). While others wait and get their refund with no interest, you can earn up to 80-100 dollars extra, at virtually no risk, just for being shrewd. And there may be returns out there better than ING.

And if you're really serious, you can move that extra savings into your 401k/IRA/BSA....

So now you know that letting the Government manage your money isn't the best idea, how do you fix it so the same thing doesn't happen next year? Go into human resources, and ask to modify your W-4. You need to make more claims so that the government withholds less. You may even be able to do it online. Questions? Comments? Hit up the Comments section! >>>

The Tower

"Suppose one of you wants to build a tower. Will you not first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, “This fellow began to build and was not able to finish.” – Jesus Christ

I can feel many of you pulling away from me already—maybe because I used a Jesus quote, maybe because you feel you’re too young and “you’ll always have time” to prepare for retirement, and you just want spend the first few years pursuing youthful indiscretions. Let me just tell you this: those urges do not go away after graduation. You’ll always want to take the alumni Spring Break trip to the Caribbean, the Greek cruise, the big-screen, the new car, and (gulp!) the Ring. This, in theory, is fine—given that you have the cash to pay for it. Notice I didn’t say the credit.

America has virtually replaced terms like “no,” “wrong,” “wait,” and “discipline,” with “just use credit.” Honestly, which sounds sexier: “No, it’s not wrong to use credit for big things. Discipline yourself and work until you get the cash to own it outright! ” Or: “Live a little! Just put it on your card and pay it later,” or “Leasing or buying a new car shows sophistication!” Or other gems of conventional wisdom. Commercials now tout the Fast Pass MasterCard—quickly tap and go. Or in other words, don’t spend time “thinking” about purchases. Just tap and go!

Many of you will enter the workforce making upwards of 50,000/yr or more. For a single person, that’s not “chump change.” The average American household lives on $40,000 - the celebrated middle of the middle class indeed. When building a financial tower, you want to think about retirement and building a safety net. Like Mr. Covey says: “begin with the end in mind.” Why? What if construction stops early? What if you promise so many workers that “you’ll pay them later” that payroll (you) falls behind? They’ll quit. They’ll sue for their money. All you have is a half-built tower. The bank can help you finish it, but when you die, guess what? They get it, not your kids. And the cycle continues.

You get the foundation in college if you take the right economics class. How many times have you been hit over the head with the ‘20%-New-Car-Depreciation-off-the-lot’ argument… only to go out…and buy a new car anyway? Fool me once...

There’s also a way to build the tower with planning. No, its not “new age,” or “fast-paced.” People will “pity” you for not doing they way they did. But know this: the majority of millionaires in the world didn’t get it in 5 years. You just saw the end-result—when they’re profiled in magazines or on TV. Their wisdom is not hidden, its just doesn’t sound fun. Spend less than you earn, save more than you spend, and put what you save into a high-interest account.

Let’s build that tower together. I’ll help you. And I'll make sure you get help. I didn't do it alone, and since the ideas aren't mine, I won't charge you either.

Because I Care..

Welcome to Wealth Weekly. This is my attempt to convince as many of my friends as possible about the do's and don'ts of wealth management. My credentials are somewhat light. I'm just starting to invest on my own but I have a definite plan to build a financially secure environment for my family (when I get one) and to provide an example for my friends. If you have spilled over onto this site--welcome, and feel free to join the fun.

I have run two (somewhat) private investment clubs--one at Morehouse College from 2002-2003, and one at Georgia Tech in 2005. My topics focused on the slow way to riches. If you're looking for that "Get Rich and 10 years" method of investing, you should probably click on through to another site. My mentors include Dave Ramsey, www.fool.com, and www.blackenterprise.com, and other subscribers to the debt-elimination strategy to true wealth.

My target audience is primarily for middle-class minorities, because that's who I know best. However, money management isn't racially-based, and the topics covered here can apply to anyone. Don't feel unwelcome. Some are asking why I'm doing this. It's simple--because, believe it or not, I care. I don't want to see people struggle and fall prey to the predators of poverty. I want to see people succeed in life, and to have time to enjoy life without spending most of their lives having to "owe" any entity financially. Most of our schools aren't helping people with personal finance education, and most colleges don't require it.

So, I join the long list of those who will fight to get the right infomation. The media will fool you, becuase they know you won't read or check their facts. I encourage you to check mine. I don't have all the answers--not even most of them. But I know a little bit about a little bit. And I'll share it with you. Hopefully, we can exchange ideas, and succeed together.