- Part 57

Archives For Corey

Changing Your Name after Marriage

Corey — October 8, 2009

After you get married, there are several places you’ll need to update your name (if you’re taking your married name) or address (if you’re moving). Here’s a quick checklist you can use to make sure you don’t forget anything:

Social Security Card – You’ll need to go to your local Social Security office to update your name on your Social Security card. You’ll need your marriage license or certificate for proof. If you don’t know where your closest Social Security office is located, you can find out here. It will take a week or two before you get your updated Social Security card in the mail.

Driver’s License – You’ll have to check out your DMV’s website for the steps you should take. Once you’ve updated your Driver’s License and Social Security card, you should have no problem updating the rest of these things.

Forward Your Mail – You can have your mail forwarded by picking up the form at your local Post Office or by going to the USPS website (though it will cost you $1 to do it online). You’ll want to forward your mail for your old name and your new name to cover all your bases.

Passport – If you already have a passport, you’ll want to get that changed as well. You can find the appropriate form on the Department of State’s website.

Auto Title & Registration – You’ll also want to change your name on your auto title and registration if you own a car. This may or may not require a trip to your DMV. Many DMV’s offer this service through the mail or on their website.

Employment & Professional Licenses – Let your employer know you’ve changed your name. If you have a professional license, you’ll want to update your name with the appropriate agency.

Bank, Investment, and Credit Card Accounts – If you’re combining your finances, you’ll also want to look at consolidating these accounts or adding each other as joint account holders.

Insurance Policies

Doctor’s Offices

Utilities (Electric, Phone, Internet, Cable, etc.)

Cell Phone

Student Loans

Library Card

This list doesn’t cover everything you’ll need to do, but it should cover most areas. Are there any other big things you should include? Leave your suggestions in the comments!

In Miscellaneous

Use It Up, Wear It Out, Make It Do, or Do Without!

Corey — October 7, 2009

“Use it up, wear it out, make it do, or do without!” This saying from the Great Depression shows the way to true frugality. If you want to get the most out of your money, follow the steps outlined in this little rhyme.

Use It Up

Don’t let anything go to waste. Before you throw something out ask yourself if there’s anything else you could use it for. Many frugality tips revolve around repurposing materials for new uses. Bread bags can be cut in half to use as sandwich bags. Old towels can be cut into washcloths. With a little thought and creativity, you can reuse the things you’ve bought and save yourself from buying again.

I’d also apply to this to food. Don’t let your leftovers go to waste. Plan your meals well so you use up leftovers before fixing another meal. Or create a new meal from your leftovers. Many leftover items can be combined to make a soup, stew, or casserole with just a few additions.

On your next trip to the trash can, ask yourself, “What else could I do with this?”

Wear It Out

Make sure you get the full use out of anything you have. This is a lot like the first step above, but we should also include maintenance in this category. Take good care of the things you own so you can get the full use out of it. This especially applies to appliances and automobiles. Find out how to properly take care of these items. Then make sure you do the things necessary to keep your stuff in good shape. Don’t skimp on maintenance, but try to see if you can save money by doing some things yourself.

This also means you shouldn’t buy cheap just for the sake of getting a bargain. Quality items will last much longer making them worth the extra cost. You’ll also save time by not having to shop for a replacement as often. Getting the most value for your dollar doesn’t necessarily mean paying the lowest price.

Make It Do

Before throwing something out, see if you can fix it. Many things that wear out or break can often be repaired for a fraction of what it costs to buy new. Do a little research or ask someone you know who is knowledgeable and find out if it can be fixed. If you can, fix it yourself. You’ll learn valuable skills and likely save money over paying someone else to do it. If not, find a trustworthy person to do the repairs for you.

Other strategies you can use to “make it do” include buying it cheaper, making it last longer, and using less of it. Combine those three strategies to get the most savings possible. We can often use less of something and still be just as happy. Take toothpaste for example. Do you put enough on to cover all the bristles? Try using half as much. If your teeth and mouth still feel clean and refreshed, then you don’t need to use any more than that. If not, bump it up a little. Little steps like this require no extra time on your part, but they can reap you significant savings when applied over many areas of life. And that’s all with no decline in quality of life.

Do Without!

Contentment is the key to the final aspect of this wise saying. Knowing how to separate your needs and wants gives you powerful control over your finances. Learning what is “good enough” for you will help you delay purchases and get the maximum use out of the stuff you already have. Ignoring the cultural expectations to keep up with the latest fads will save you more money than you can imagine.

This instruction has a hidden benefit as well. When you learn contentment, you break free of materialism and consumerism. You can choose to stop serving Money and start serving God. You can increase your giving because you’ve learned to spend less on yourself. The truth is – contentment is wealth. It’s the most powerful way you can combat the blatant attempts by the media and corporations to control your mind and your wallet. Finding your satisfaction in Christ will help you value things appropriately in this life so you can make the right decisions for the next one.

How Do You Follow This Slogan?

How do you “use it up, wear it out, make it do, or do without” in your own life? Share your examples in the comments!

In Frugality, Stewardship

Why You (Probably) Don’t Need Permanent Life Insurance

Corey — October 6, 2009

There are only three reasons you would need permanent life insurance coverage. If these situations do not apply to you, then you shouldn’t buy or keep a permanent life insurance policy.

Do These Situations Apply to You?

You may need permanent life insurance if any of these situations applies to you:

You Have a Special Needs Child. – If you have a child with special needs who will still need income after your death and is unable to earn it themselves, you should consider permanent life insurance. You’ll want to set up the policy to pay out into a Special Needs Trust, and you should work with a qualified attorney with specific experience in this area.

Your Estate Will Be Illiquid and You Will Owe Estate Taxes. – If you will have an estate that exceeds the estate tax exemption amount and will not have enough liquid assets to cover those taxes, you should consider permanent life insurance to cover that need. You’ll want to work with an experienced estate attorney and accountant or financial planner to estimate how much you’ll owe in taxes and determine how much insurance you should buy.

You Own a Business with a Partner or Partners. – Permanent life insurance can be used to set up a buy-sell agreement between you and your partner(s). The life insurance will provide the cash needed to buy out a partner after his death. Again, you’ll want to work with an experienced attorney and accountant to value the partner’s share and set up the agreement.

Those three situations are very specific and apply to only a small percentage of people. That’s why permanent life insurance is a bad idea for most people. If those situations don’t apply to you, then you should only be looking at term life insurance – if you need life insurance at all.

Consider the Source

If you have a life insurance salesman pressuring you to buy a permanent life insurance policy, ask yourself why he’s recommending that product. If you don’t have a true need for permanent life insurance, there’s a good chance he stands to make a huge commission on the policy and that’s why he’s making the recommendation. The commissions on permanent life insurance policies can be 4-8 times higher than commissions on term life insurance policies, so it’s easy to see the conflict of interest.

Be open to permanent life insurance if you really need it, but be very wary of anyone who recommends it when you only need term life insurance. Ask why and consider if those reasons are applicable to you. Only make your decision after careful consideration.

Cash It Out If You Don’t Need It

Finally, if you have a permanent life insurance policy but you don’t need it, then cash it out as quickly as possible. I don’t care if your dad bought it for you when you graduated high school. If you don’t need it, it’s a waste of money. Call up the insurance company and tell them you want to cash out the policy and cancel the coverage.

Don’t buy something just because it seems like a good idea. Make sure it fits your needs and your situation first. If it doesn’t, then stay away!

In Insurance

The Budget – An Essential Tool for Personal Finance

Corey — October 5, 2009

Budgets are good. That’s right. I just said a budget is good. We hate the sound of that word, don’t we? It reeks of denial, hardship, restraint, and, for most people, boredom. But failing to create a budget and stick to it (to some degree) is one of the primary reasons so many people have a hard time managing their personal finances. So here are a few reasons why it’s good to have a budget and track your expenses.

You can easily figure out if you’re spending too much money.

By tracking and totaling your expenses over one or two months, you can easily figure out if you’re spending too much money. Add up your monthly income, subtract your monthly expenses, and if the result is negative then you’re spending too much money. There are other ways to tell if you’re spending too much money (is your debt increasing every month?), but this is one surefire way to double check it.

You can see where your money is going.

It’s easy to lose track of all your bills and remember where you spent the cash you had in your wallet or purse. By creating a budget and continuing to track your spending, you can keep a comprehensive list of all your expenses and how much they cost. From there, you can see where your biggest outflows are and find ways to save money in those areas.

You can target specific areas for improvement.

Once you’ve tracked your spending for a bit and are comfortable with the numbers, you can decide on budget goals. Where do you want to cut back and by how much? If you don’t have your budget written down (on paper or electronically), it’s much more difficult to set these goals for yourself.

You’ll start spending less.

The mere act of tracking your spending is likely to cause you to spend less. Why? You’ll become more conscious of your spending habits and begin to carefully examine your purchases. Once you start to question whether or not you need to spend money you’ll start spending less. Be careful – Corporate America doesn’t want you to do this!

You can have less stress and make better decisions.

Do you want to take your significant other out to dinner but you’re not sure if you can afford it? Check your budget. Friends invite you on a weekend road trip but you’re worried about money? Check your budget. If you can fit the expense into the appropriate budget category, then you can spend without guilt. (Assuming, of course, that you are meeting your savings goals.) Finally, you’ll have a good idea of how much money you should have in your emergency fund. Take your necessary monthly expenses and multiply by some number between 3 and 12. (You can’t do this if you don’t know your monthly living expenses!)

My Budgeting Confession

With all that said, I have to tell you that I no longer stick to a strict budget. I track my expenses in Mint, but I don’t restrict my spending in any certain categories. I do have a budget, but it’s mostly because I like numbers. I don’t manually keep track of what I spend. I have all my bills set on auto-pay (except heating oil), my savings is automatic, I have a sizable emergency fund, and I have my spending under control. If you can say the same about your own situation, then I actually encourage you not to track your spending too closely. It’s a waste of time if you don’t need it. But I would still recommend periodically reviewing your spending with a tool like Mint to make sure you don’t get too far off track.

On the other hand, if you aren’t paying yourself first (automatic savings), haven’t established an emergency fund, or don’t have your spending under control, then you absolutely need a budget until you get to that point. If you really hate the idea of budgeting and tracking your expenses, just remind yourself that eventually you won’t have to do it anymore. It’s only temporary!

In Budgeting

When Should You Use Your Emergency Fund?

Corey — October 2, 2009

Once you’ve established your emergency fund and built it up a bit, you’ll need to decide when you should and shouldn’t use your emergency fund. If you don’t set guidelines for yourself, you’ll find a reason to use it for non-emergencies. And when you need it the most (after losing a job), you won’t have as much saved up to cover the real emergencies. Define boundaries for what you consider an emergency and what you don’t.

Job Loss/Income Buffer

Depending on your situation, you’ll want 3 to 12 months of your living expenses saved up as an emergency fund. This money is to help you cover your expenses while you’re looking for your next job. You need this money because relying on debt takes a stressful situation and amplifies it ten times over. You don’t want to find yourself digging out of debt as you start your new job. This can also apply if you are self-employed or depend on commissions for your income. You can use your emergency fund as an income buffer while times are tough so you can focus on getting more business instead of how you’ll pay the next bill.

Other Stuff

This is where you need to decide how you’ll use your emergency fund. It’s clear that a job loss counts as a real emergency, but it’s not so clear for everything else. Medical emergencies, family emergencies, and household emergencies do happen, but there are also many situations for each of those examples that we can plan and save for ahead of time. We know that cars break down over time, so we should be saving up for car repairs even if our car is paid off. We know that household appliances break and things will need to be fixed, so we can save up for those problems.

It doesn’t really matter how you lump together or separate your savings, as long as you know they’ll cover your unexpected expenses. For example, you can have an emergency fund that covers everything. Or you can choose to have an emergency fund that’s really only for when you lose a job while you have a car fund, house fund, medical fund, and “other” fund for those costs. It doesn’t matter how you break it up, as long as you know what you’ve decided to do.

So if you’re going to have a catch-all emergency fund, you’ll want enough to cover your living expenses for a certain number of months plus some extra for all the other emergencies that will come up in life. Plus, you’ll need to keep replenishing it as you spend the money. You might decide to keep six months of living expenses plus another $3,000 in your emergency fund while continuing to add $50 or $100 every month.

Or you can go with separate accounts for everything. The number and type of accounts you use will be very dependent on your personal situation, but let’s say you have a job loss fund, medical fund, car repair fund, house fund, and “other” fund. If you own, you’ll want a larger house fund than someone who rents. If your car is older, you’ll want more in the car repair fund than someone with a newer car. If you have children or a high-deductible health insurance plan, you’ll want more in your medical fund than someone who’s single with great health insurance. Think about your own situation, the cost of a typical emergency in each category, and how frequently those emergencies occur. Then set up a savings plan to build those funds and keep them replenished when you spend the money.

Avoiding the Double Emergency

Without an emergency fund (or however you decide to do it), any emergency becomes a double emergency. Not only do you have to deal with the car breaking down, but you also have to worry about how you’re going to get the money. Every crisis adds a financial crisis because you don’t have a clear plan to deal with those money issues. Take the time to think about how you’re going to set up your emergency fund(s), what you’ll use them for, and how you’ll rebuild them after using them. It won’t eliminate the stress of the emergencies, but at least you won’t have to worry about where the money will come from. God can and will care for you in any emergency, but prudence teaches us to prepare for the emergencies we know we’ll face.

The prudent sees danger and hides himself, but the simple go on and suffer for it.

Proverbs 22:3 (WEB)

In Saving

Let Jesus Be Your Example for Giving

Corey — October 1, 2009

I’ve done a lot of research on giving in the Bible and God’s desire for Christian giving. The most disturbing thing I’ve found during my research is arguments between Christians about tithing versus generous giving. They argue over words and trivial things while neglecting to look at the simple example Jesus gave us for how we should give.

Jesus gave up everything to save us from sin. He left the power and glory He had in Heaven to come down to earth so He could lay down His life for us. He taught us to love one another – even our enemies. He told us to give generously to anyone who asks and to take care of the poor.

Jesus exemplified and taught us to practice sacrificial, generous giving. He didn’t want us to get caught up on just how much we should give or following the letter of the Law. He asked us to look at the love of God and then to show that love to all people. Now God’s love is so generous that He gave up His Son for us. Jesus didn’t just give 10% of His life – He gave it all. And when you read Jesus’ appeals to give to the needy you don’t see any talk about minimum requirements. He asks us to give up our devotion to the world and worldly things and instead to build up our treasures in Heaven.

Paul pointed out the generosity of Jesus to the Corinthians:

⁷ But as you abound in everything, in faith, utterance, knowledge, all earnestness, and in your love to us, see that you also abound in this grace. ⁸ I speak not by way of commandment, but as proving through the earnestness of others the sincerity also of your love. ⁹ For you know the grace of our Lord Jesus Christ, that, though he was rich, yet for your sakes he became poor, that you through his poverty might become rich.

2 Corinthians 8:7-9 (WEB)

Jesus set the example for us by becoming poor even though He was very rich. He had every right to enjoy His limitless wealth. He was under no obligation to give it up. He deserved it. But He chose to become poor so that He could meet our need. He chose to give generously and sacrificially because of His abundant love.

That is the example we should follow as Christians when deciding how much we should give. We need to let the love of God guide our giving. If we say we believe in Jesus and we love God but we don’t give as God’s Spirit directs us, how can we say we are really following Christ? If our actions do not make God’s love evident, how can we say that His love lives in us?

But whoever has the world’s goods, and sees his brother in need, and closes his heart of compassion against him, how does the love of God remain in him?

1 John 3:17 (WEB)

Christian giving should be focused on following Jesus’ example and teaching. Pure generosity motivated by pure love. We should be charitable because we depend on Jesus’ charity. Without it, we would have and be nothing. There would be no hope for us. But because of Jesus’ generous sacrifice we have hope beyond this life and wealth that exceeds all the riches of this world.

My plea to all Christians is that we would not argue over silly things like percentages when Jesus has shown and taught the example we should follow. Our giving should reflect the love of God and be based on His generosity – not on percentages. God will provide for our needs and the needs of our churches if we seek to walk in the love of Christ. There is no need for percentages or commands to guide the giving of Christians following God’s Spirit. The Holy Spirit will teach us how to give, where to give, and how much to give. God has made it clear that He expects us to submit everything to Him – which includes all of our money and not just 10%. Have faith in the wisdom and power of God to accomplish His will and to teach His children.

In Giving

Who Actually Believes in Index Fund Investing and Other Boring Investment Ideas?

Corey — September 30, 2009

Diversification, index funds, low expenses, tax efficiency…they’re all so boring. Isn’t there a better way? Can’t I use research, insight, intuition, and intelligence to beat the market? Who actually believes this boring stuff anyway?

The guy in the fancy suit on TV doesn’t seem to believe it. The writers of financial publications are constantly telling us which funds are going to be hot this year, or month, or week. There are millions of investment ideas on the Internet which include all kinds of fancy charts and systems and fantastic results. It doesn’t seem like anyone believes in index fund investing and boring ideas like diversification. Everyone seems to have some secret for how they’re going to beat the market, so why shouldn’t you as well?!

Look Who’s Talking

Before you begin to think that index fund investing is only for schmucks, let’s take a minute to look at who supports these various investment ideals. First, the side of active management, market timing, and various other strategies to “beat the market”:

Stock Brokers and Investment Managers – For a fee or commission (or both!), these guys will help you pick the “right” funds or stocks at the “right” time so you get nice returns every single year. They’ll even send you a gift card or free sports tickets every once in a while just to show you how much they appreciate you!

Some Mutual Fund Companies – Sure they charge higher expenses than Vanguard does, but they’re giving you access to the “best” mutual fund managers in the world. With their team of 5,208 researchers, they’re bound to uncover information that will give them the ability to beat the market. And don’t forget about those mutual fund companies with a long family background of managers. All that experience is sure to come in handy.

Market Timing & Stock Picking Newsletters – In the do-it-yourself mood? Just subscribe to one of the many market timing or stock picking newsletters, and Slick Sam will tell you exactly when you should get in and out of which stocks. He might even set you up with a service where his recommendations can be traded automatically in your brokerage account. You don’t even have to do a thing and you’ll make a 389% return in a matter of months!

The Investment and Financial Media – Dow drops 600 points! Stock futures headed down this morning because the commissioner has a cold! Is your portfolio safe? Ah, the financial media. They constantly keep us up-to-date on the latest market news and even give us advice about the next top mutual funds. All we have to do is keep watching their shows or buying their newspapers and magazines and we can reap the benefits of all their knowledge.

Do you see what I see? Every single one of these players has a vested interest in selling you something—especially in selling it to you again, and again, and again. My father once told me everyone has something to sell, and he’s right. Even the most objective advisor has to get paid somehow. But we have to look carefully at the seller’s motives before we buy—more so when the product is financial advice.

Now what about the side of index fund investing, diversification, low expenses, and tax efficiency? Let’s look at the supporters of these really boring investment ideas:

Dr. Harry Markowitz – A Nobel Laureate in Economics for his pioneering work in the theory of financial economics. He helped develop Modern Portfolio Theory, which looks at the effects of asset risk, correlation, and diversification on investment returns.

Dr. William F. Sharpe – Also a Nobel Laureate in Economics for his pioneering work in the theory of financial economics. His work revolved around the ideas of the risk and return model and the Capital Asset Pricing Model, which is part of Modern Portfolio Theory.

Dr. Paul Samuelson – Another Nobel Laureate in Economics. His findings can be summarized as: market prices are the best estimates of value, price changes follow random patterns, and future stock prices are unpredictable.

Dr. Eugene Fama – A professor in economics and finance at the University of Chicago. His research covers the randomness and unpredictability of stock market prices, the Efficient Market Hypothesis, and the Fama-French Three Factor Model, which explores the factors that explain an investment security’s return.

Dr. Kenneth French – A professor of finance at the Tuck School of Business, Dartmouth College and former professor at MIT, the Yale School of Management, and the University of Chicago Graduate School of Business. He is most famous for his work with Dr. Eugene Fama on the Three Factor Model.

Dr. Michael Jensen – Former professor at the University of Rochester and Harvard Business School. He found that only 26 of 115 actively managed mutual funds outperformed the market in his paper “The Performance of Mutual Funds in the Period 1945-1964”.

Dr. Burton Malkiel – A professor of economics at Princeton University. He authored A Random Walk Down Wall Street, which discusses the randomness of asset prices and the Efficient Market Hypothesis.

John Bogle – Founder of The Vanguard Group

Warren Buffet – Famous Investor. He recommends the average investor put his/her money in index funds.

What do you notice in this group? A few less marketing gurus and a few more academics? So whose advice are you going to trust for the future of your retirement? A fast-talking salesman who rushes through the facts, or a research-driven Nobel Laureate whose life has been dedicated to teaching?

I know who I’m going to listen to.

In Investing

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