Financial emergency brings one couple closer together

A financial crisis like a job loss can put enormous stress on a marriage and a family. But it can also bring deeper problems to the surface that can turn it into a blessing in disguise.

For instance, Sara and Tom always considered themselves a typical American family when it came to their household finances. They each worked full-time, carried some credit card debt, and generally lived within their means.

But in the back of her mind, Sara knew something wasn’t right. Whenever she sat down to pay the bills, she felt a sense of fear and insecurity. “We’ve always been okay financially. We didn’t overspend and we are not extravagant people, but we didn’t have an emergency fund,” she said.

In a financial bind
Like many people, Sara and Tom [I’ve changed their names to respect their privacy] felt there was no reason to expect a financial crisis. They both have good jobs—Tom is in the New Jersey state government, Sara is a sixth-grade science teacher—where they’ve worked for more than 20 years. But in the spring of 2004 Tom had to stop working due to a serious illness, putting the family in a bind.

“We needed to learn how to live on one salary when we were just doing okay on two salaries. We didn’t know how we were going to do it,” Sara said.

I met Sara and Tom through Good $ense, a financial counseling ministry I serve with through our church. While a crisis had prompted them to seek counseling, it was evident that Sara and Tom often were not on the same page financially. Sara is more of a saver, Tom more of a spender. Money was often a source of conflict in their marriage.

Accountable to their budget
As their counselor, I helped Sara and Tom examine their income, assets, and spending patterns. They learned how to create a spending plan for their family each month, something they had never been able to do before. Each time we met, they stayed accountable as to how well each was sticking to the plan. As they began to monitor their budget and plan together how to pay their bills with less income, the stress and conflict caused by the money problems subsided.

“[The counseling] put us on the right track,” said Tom. Sara agreed, “It helped me to feel secure and safe when everything felt out of control.”

A catalyst for positive change
Thankfully, Tom has since recovered from his illness and is working again. Though the emergency is over, the lessons on budgeting and getting on the same financial page have stuck with them. A crisis turned into a catalyst for positive change in their marriage and financial life.

“The funny thing is, we were more financially together during that time of our lives than ever before,” Tom said.

My daughter's millionaire dreams aren't far from reality

Our oldest daughter Jessica said she wants to be a millionaire someday. At age 19, she’s off to a good start, and that substantially increases the odds of achieving her goal.

A few weeks ago, Jess took about $1,600 she’d saved from after-school jobs and opened a Roth IRA. With a Roth IRA, Jess can save and invest for her future, such as retirement. The money she puts in will grow without being taxed, just like a traditional IRA or a 401(k) plan. However, unlike those types of retirement savings vehicles, when she starts taking money out of the Roth IRA down the road, her earnings likely will be tax-free.

$100 a month to start
Naturally Jess isn’t thinking as much right now about retiring from her career as starting it. She’s in her second year at Northeastern University in Boston, majoring in journalism and cinema studies. Part of her education includes a semester working full-time at a local newspaper, so she’s been getting a weekly paycheck since January. Her plan is to put at least $100 a month into her Roth account for the foreseeable future, and beyond.

No school debt and lots of time
Jessica’s opportunity to build substantial wealth is enormous thanks to two huge advantages she has. First, she attends Northeastern on a full scholarship. She will graduate in a few years with no school debt whatsoever, which should help to keep her plans to save on track even while pursuing a career field where starting salaries often almost feel like minimum wage.

The second advantage is time. With a savings horizon of 40-plus years, Jess’ sacrifices of trendy clothes, late-night pizzas, and morning ice coffees in these college years could mean financial freedom and security in her retirement years. I’d bet some Baby Boomers today wish they had made the same decisions when they were her age.

It sure adds up
Not that Jess needs any motivation, but I e-mailed her these numbers to show just how wise she really is to start a meaningful saving plan at age 19:

(For simplicity, I based my calculations on a 10% average annual return on the IRA investments.)

• By saving just $100 a month in a Roth IRA, Jess stands an excellent chance of being a millionaire by the time she is 63 years old.


• If she increased her savings to $168 a month, she has a great likelihood of being a millionaire by her 60th birthday.


• If she starts saving the maximum amount allowed for an IRA ($4,000/year in 2007, or $333/month), she could even have her first million by the time she turns 52 (not even “retirement” age).

Granted, $1 million in 2047 won’t get Jessica a retirement that is 100% financially secure. But unlike many kids her age, she already understands the value of saving and sacrifice to reach a long-term financial goal, and that will serve her well.

I couldn’t be prouder.

Lessons learned from buying a used van

The search is over. I wrote in January that M and I were in the market for a minivan and we finally bought one: a silver-blue 1999 Honda Odyssey EX that has just 89,000 miles. It’s already proven a nice addition to the family; on a road trip last weekend, we buckled CJ Jr. into his carseat and peeled off wet jackets while staying warm and dry within its spacious interior, as a Nor’easter raged outside our windows.

As an added benefit, we saved about $1,000 on the purchase price—money we plan to shift toward our goal of building an emergency fund of three months cash reserves.

As thrilled as M and I are with our purchase, it wasn’t easy. At times, we both longed for the convenience and security of buying brand new. But I did learn a few good lessons from our Odyssey-shopping “odyssey.”

Be patient
The search was slow, lasting six weeks start to finish. Along the way, I visited nine dealerships within a 50-mile radius of our home. I responded to four private ads, even test driving one vehicle while on the way to a family function (for which we ended up being late). And I spent many evening and weekend hours hunting for prospects on cars.com, kbb.com, and phillycars.com.

Even more maddening than the time spent was the time wasted, checking out vehicles that didn’t live up to their billing. Opening the hood of an Odyssey at one small dealer revealed what looked like actual tumbleweeds lodged in a grime-covered engine. A 2001 Nissan Quest advertised as “well-maintained” vibrated unnervingly as M eased it out of the driveway on a test drive.

Was the time and effort worth the ultimate benefit? It didn’t always feel like it. More than once we considered throwing in the towel and diving deeper into savings to increase the $10,000 maximum pricetag we wanted to pay. Now, as we enjoy the extra space and the automatic sliding doors (which CJ Jr. opens with an enthusiastic “Abracadabra!”)—all within our original budget and requirements—I’m glad we patiently stuck to our plan.

Be skeptical
I’m smart enough to raise an eyebrow when a vehicle’s seller says the emergency brake-indicator that continually stays on during my test drive “doesn’t mean anything.” But I almost gave in on one of my key buying criteria—having my own mechanic inspect the vehicle I wanted to buy—because I wasn’t skeptical enough.

Several used car dealers told me I couldn’t drive their vehicle to my mechanic before buying it. The reason? Insurance wouldn’t cover it (my mechanic is near my home, so it usually meant a trip of several miles). After the first few dealers threw up the same roadblock, I was almost ready to concede the point.

But my father, an attorney with lots of experience suing car dealerships, said the dealers’ rationale was nonsense. It was unlikely the vehicles weren’t insured, and even if that was the case, I had coverage as a driver. Most likely, the dealers didn’t want to take the chance that my mechanic would find something wrong.

Sure enough, the dealership that eventually won my business had no problem with me driving the Odyssey the 25-plus miles to my mechanic before I paid a cent. Jason, the salesperson, didn’t ask for a deposit or even the keys to my car. “We’re confident that our guys found everything and anything, so have at it,” he said. My mechanic gave the van a nice thumbs-up (“It’s got a lot of life left in it,” he said) and I had some much-needed peace of mind.

Make an offer
Like many people, I don’t like haggling over a car’s price. But I know that haggling can mean money in my pocket, and I am cheap by nature. So I haggle.

And it works. In buying our Odyssey, I made an initial offer of $8,000, 20% below the dealer’s $10,000 advertised price. I thought it absurdly low for one of the best vans I’d seen, and Jason seemed to confirm it by quickly shaking his head.

“No way,” he said. “There might be some wiggle room, but not that much. We don’t price our cars artificially high and then discount them thousand of dollars during the sale to make buyers think they got a great deal. We advertise what we feel is our best price.”

I took a breath. The Odyssey’s price was certainly in line with others I’d seen advertised for similar vans, I said. But it wasn’t the lowest either, and besides, we had no real idea what other vans were actually selling for. It was probably less than $10,000, I concluded.

“Let me take it to my sales manager and see what we can do,” Jason said.

Five minutes later, he came back with a $9,000 offer. I shook his hand and sealed the deal. Looking back, I wonder if I my “absurdly low” offer was really too high.

The path to wealth is usually a slow one

There are no shortcuts to financial success, but you wouldn’t know it by the Internet. Just Google the phrase “get rich quick” and you get advertisements like these:

“Bring in $100,000 a month: I can teach you how!”

“Turn $600 into $39,000 with the Forgotten Commodity!”

“Earn money fast and LEGALLY!”

Seeking quick riches can spell trouble
The absurdity of the ads’ claims is worth a chuckle. And maybe you've never felt tempted to click one just to “see what it’s all about.” But someone is clicking, and buying into the ads’ promises—otherwise they wouldn’t exist.

“Quick and easy” is a good description for making a box of Mac n' Cheese, not building wealth. After all, “The trustworthy person will get a rich reward, but a person who wants quick riches will get into trouble.” (Psalms 28:20)

Overnight wealth, or lasting peace?
In their research for the bestselling book, The Millionaire Next Door, Drs. Thomas Stanley and William Danko found that “building wealth takes sacrifice, discipline, and hard work”—hardly the stuff offered by the Internet ads above. But chances are most folks wouldn’t click on ads like these:

“Learn the secret to financial success: Spend less, save more!”

“Retire a multimillionaire—in just 30 years!”

“Be content with what you have. Find out how!”

Living below your means, using a monthly spending plan (budget), setting aside money for the future, and avoiding debt won’t you get rich overnight. But they can vastly improve your chances of accumulating wealth in the long run. More importantly, they offer the promise of something much better: lasting peace and contentment.

Woman's good financial sense leads to windfall

Making wise personal finance decisions can be hard because they often require short-term sacrifices for long-term benefits. But they do pay off--and as one California woman found--even quite handsomely.

Hoping to help pay for her oldest daughter's tuition to the University of California, Berkeley, the woman decided to auction off a painting that once belonged to her grandmother, according to an Associated Press report. Instead of the few thousand dollars the woman was expecting the painting to fetch, she was stunned at the picture's final bid: a whopping $620,900.

A possibly difficult choice

Not having the needed funds for her child to attend a terrific school like Berkeley, Mom could have easily required the daughter to load up on student loans. As colleges go, Berkeley is a nice value; in-state undergraduate tuition for 2006-2007 averages only $7,800. Commuting to school from home, the daughter could conceivably graduate in four years with a "reasonable" $70,000 in debt.

But Mom faced head-on what may have been an emotionally difficult choice: Part with a painting that hung on the wall for years in her grandmother's home in Italy? Or strap her child (or the family overall) with a debt-load that might take years and years to pay off?

By choosing to sell the painting, the family can now afford to provide all of their children with higher educations without putting themselves behind the financial eight-ball. Maybe they can even have a more secure retirement.

The wisdom of avoiding debt

To be sure, the woman's experience is rare. The sold painting was unsigned, rumored to be the lost work of 17th-century Italian art master Pier Francesco Mola. Who knows if it is worth the price that the unnamed art dealer paid for it.

I won't be searching my parents' basement anytime soon for family heirlooms that could help pay our kids' college costs. But, like the mother in this story, I will do whatever I can to avoid overloading our family and our children with substantial student loan debt. That approach may not get us a cool $600,000, but I know that it, too, will have its rewards.

Want that bank fee waived? Then ask

The ATM receipt I held gave me a sickening feeling. A negative sign showed next to the balance amount.

M’s and my checking account was overdrawn, and I knew exactly why. I’d forgotten to deposit a check I had put in my wallet earlier in the week, which was why I had gone to the ATM in the first place.

The good news is that I didn’t have to pay an overdraft fee, and not because Commerce Bank didn’t charge one (a nice, hefty $35). In fact, it was because I asked them not to.

A benefit of competition
You might be surprised to know that fees at banks, credit card companies, and other financial institutions are often negotiable. Many times—but not every time—you can avoid paying a charge that’s been levied on you for whatever reason simply by contacting the company and asking them to waive it.

Over the years I’ve saved by having the annual fee on my credit card waived, as well as charges for making a payment by phone (when I’ve been a little late mailing the check). Buying my first house, my father encouraged me to push the mortgage companies competing for my business to remove the many extraneous charges ($35 for courier services, $25 for faxing paperwork, etc.) that they like to tack on to provide the loan. Not every company waived every fee, but some did.

The reason financial companies are willing to let you keep your money? Competition. Losing your business to another bank or credit card company costs them much more than losing the revenue from a one-time $20 or $30 fee. Besides, for every person who asks to have a charge removed, there are many more who simply pay it, no questions asked.

Good financial habits help
That said, financial companies are only willing to go so far. If you make a habit of bouncing checks or paying your credit card late, you have little chance of avoiding the resulting penalty charges, no matter how nicely you ask.

In the years M and I have been customers at Commerce, I can’t recall being overdrawn any other time. We also were never late with a payment on M’s car loan, which they financed, and paid it off several months in advance. So the tedious chores associated with being a good financial steward—balancing the checking account, tracking where our money goes—do have their rewards.

Still, being temporarily overdrawn has shown me that I keep the cash level of our checking account lower than I should. I don’t like the idea of keeping a hundred or so “extra” dollars in the account—money that isn’t accounted for in M’s and my monthly spending plan—where it can be easily tapped. But it’s probably better than relying on my memory to make sure I always make our deposits on time.

Charged up about the cost of a cell phone battery

I've been debating getting rid of M and my cell phones. Buying a cell phone battery has pushed me a little closer to hitting "End Call" permanently.

I've had my LG VX3300 cell phone for about 15 months--not that long, in my estimation. I use it only moderately; I rarely go over the minutes in my service plan and I turn it off when I'm at work. So the fact that the factory model battery recently stopped holding its charge for any length of time was annoying enough.

Then I went to my friendly local Verizon accessory dealer for a replacement. The pricetag: an appalling $49. More than twice as much as I expected. As M pointed out after I got back, "For that, you could have gotten a whole new phone."

I want what I want
Yes, I could have. But I didn't want a new phone. My phone serves my purposes well enough. I don't need a cameraphone, a webphone, or a phone with the ability to answer e-mail.

And I definitely don't want a new cell phone plan, which cheap new phones often come with. I can't wait for our current two-year contract to run out so we can unload it from our monthly budget. I'd rather put $82 toward CJ Jr's college fund--which we've temporarily stopped contributing to, since we went to one income--than give it to Verizon.

I've considered paying the cancellation fee. Dishing out the $150 for each of our two phones is less than half than amount we'll pay ($738) for the next nine months to finish out the contract. But I just can't stomach putting out that kind of money for absolutely nothing.

Two big errors
I do shoulder some of the blame for my battery "overcharge." I didn't shop around beforehand, as I normally do. Afterwards I found one online for half the price.

I also took CJ Jr. with me on my little errand. I may have been more inclined to go to a couple different places, or even ask the Verizon guy about other options, if I had been able to keep both eyes on the cash register instead of one eye on CJ.

Now M and I have to revisit our January spending plan and figure out where that extra $30 or so will come from. That may not sound like much, but it eats up a little chunk of our expected household expenses for the month, which we try to keep as fixed as possible.

Besides, I just wanted a battery, at a reasonable price. Is that too much to ask?