Wednesday, May 16, 2012

Teach Your Children

Start ‘Em Young

There are really only three things that can be done with money, and all three are important. If you teach your children nothing else about money, teach them this:

Money is to spend, save, and give away.

My daughter Noelle is four years old. She understands that money can be exchanged for goods and services that she likes, such as carousel rides and popcorn. Demonstrating her basic understanding, she sometimes calls money “carousel cash.” She has a piggy bank, and she likes to dump out the money and play with it. We discuss what it is worth, stack it up, and put it back when we are done. She knows that we save some of it to spend “later.” She knows that we give some away. At Sunday service, we always let her put the envelope in the basket, and explain that we are giving the church some money so they can take care of the building and help people. She looks forward to this ritual. In these simple ways, she is learning to spend, save, and give away.

Money Found!

A few months ago, the family went out to eat at a local restaurant. While we were there, Noelle looked out the window and down at the ground and spotted a twenty dollar bill. “Daddy - twenty!” she said. Daddy knew it was a windy day, so he ran outside as fast as he could to try to grab that twenty. In spite of the windy day, the money did not blow away, and I was able to retrieve it. I took it back inside and handed it to Noelle. She spotted it, so it was hers. In that moment, she effectively doubled her piggy bank’s net worth.
Noelle at age 2,  spending some Carousel Cash
A few days later I asked Noelle what she would like to do with her found money. She replied that she wanted to, “Put it in the basket” at church. I thought to myself, “My kid is a better person than I am.” I wanted her to keep it. I wouldn’t give away 50% of my net worth. However, I did not try to discourage her. She had made her choice.
Being only four years old, she might not have fully understood all the implications of her decision. Still, it was heartwarming to see her choose to give the money away when she fully understood that she could just as easily have kept it or used it to buy a new toy.
The story of Noelle’s largesse spread through the family, and her generosity was rewarded. Her proud Grandpa Dave sent her a crisp new twenty dollar bill to replace the one she had given away.  That money is safely in the piggy bank.
The problem is that Noelle now thinks that if she spends all of her money, she can find some more on the ground. I explained to her that finding money on the ground is unusual, but she insists that she will look “very closely” using a “loupe.” (A loupe is a kind of magnifying glass used by jewelers, printers, dentists and collectors, among others, in case you didn’t know.) 

As Time Goes On

As time goes on, these basic lessons will lead to larger lessons. By the time Noelle is high school age, I hope I have imparted all the essentials: Work hard. Avoid debt. Save up for a car. Save for college, and then attend one that you can afford without going deeply into debt. Be suspicious of borrowing, and be aware of how much more you will have to work to pay the interest. Give generously – not only to help others, but as a sign that you trust in both God and your own ability to provide for your needs and wants. Finally, always set aside some money just for fun. 

Even Little Kids Should Have Their Own Money

A few weeks ago the family was shopping at Target. As is our habit, we let Noelle choose a toy to ride around in the cart with her while we shop. Usually, at the end of the trip we put the toy back on the shelf and say goodbye. This ritual has been working well for years. Not this time.
Noelle was holding a toy she wanted to keep, a plush, pink dinosaur. Noelle asked for the toy. We said, “No.” She did not handle this disappointment gracefully.  She had a full blown, kicking, screaming, carry-me-out-of-the-store-over-the-shoulder-while-horrified-strangers-look-on tantrum. Noelle is typically very well behaved, and this behavior is not something her mother and I have had to handle very often, and never in public. 
In our family, there is a zero-tolerance policy for tantrums. We do not reward tantrums – never. Ever. Period. Kids learn fast, and rewarding just one tantrum invites years of the same. Often, when Noelle begins to throw a tantrum we say to her, “Has this ever worked before?” This is usually enough to short-circuit the impending drama. But this time, for the first time, we wanted to give in. It is hard to explain, but this time something was different. Noelle’s cry was not a whiny, spoiled, bratty kid cry, it was a kind of mourning. She was truly sad, heart aching. Somehow, she had bonded with this toy. Lest you think I am exaggerating, she had already named it “Comfort.” She was afraid that if she put it back on the shelf, someone else would “steal it.” In her heart, it was fate, hers, meant to be. To her, someone else buying it was unthinkable.
* Sigh * 

What’s a parent to do? Our zero-tolerance policy would not allow us to buy this toy. But leaving the store without it seemed, under the circumstances, needlessly harsh. Then we remembered; she has her own money.
I said, “Noelle, Mommy and Daddy can’t buy this toy for you because of the scene you made in the store. We just can’t – but you can buy it. Would you like to use some of your own money to buy it?” 

“Yes,” sniffled Noelle. 

I continued, “If you spend your money now, you will have less for other things later. Is that OK with you?” 

“Yes,” answered Noelle. “Let’s go home and get my piggy bank.”
* Phew *
To be clear, I am not above buying a toy or treat for my children when we go to the store. I do this quite often. That said, I don’t want to set an expectation that every time we go anywhere a new toy will come home with us. So from now on, if Noelle truly wants something that I don't want to buy, she can buy it herself. This will provide teachable moments. If she can’t afford something, she will have to save up for it. When that happens, we will talk about ways that she can earn some money by helping at home. Rather than calling it an allowance, we will call it her salary. As she gets older, we will introduce a bonus and commission plan to incentivize her. Hey - just like real life! 
Teach your kids how to handle money, and start them young. Teach them the relationship between working and earning. Teach them to spend, save, and give away. Good money habits are one of the best gifts we can give our children. If they learn well, they will reap the rewards all the days of their lives. 

Thursday, May 3, 2012

The Secret Knowledge That Will Change Your Life Forever

I have unbelievable news! What if I told you that I know a proven way to build wealth, a way to get out of debt and stay out of debt forever?  Many people have paid fortunes to learn about this amazing plan. Like a magician who divulges his methods, I‘ll probably get in trouble with all the financial gurus out there if I share this incredible secret with you. But just for today, and only for the faithful readers of the moneytrip blog, I will share this fantastic secret of wealth and prosperity!
Are you ready for the secret knowledge that will change your life forever? Are you ready to set sail on a course for the debt-free life of wealth-building that you have always dreamed of? Okay, get ready and grab a pen because here it is –
Stop Borrowing Money
Yup. That’s it. 
See, this stuff is easier than it looks. 
There is no “forever” mortgage. There are no 100 year car payment options. The furniture store will not give you 3 generations to pay for that dresser, even if it is heirloom quality. All consumer debts have a finite period of repayment time built into their formula. If you stop borrowing money, you will eventually become debt free. How quickly depends on many factors, but you will get there. 
When my wife and I decided to become debt free, we were highly motivated. To me, slow progress can be painful progress. However, even slow progress is progress, and slow progress is better than no progress. If you just stop borrowing, stop swiping the Visa, stop “signing and driving” at the auto dealer, you will eventually owe no one. Imagine no payments. Imagine keeping what you earn. Wouldn’t that be something?
There is some debate about the best way to pay off debts. Some financial gurus advocate for a debt snowball approach, where you pay debts from largest to smallest. Some recommend instead paying debts from smallest to largest.  Some advise attacking debts by first going after the balances with the highest interest rates. Whatever. Just do it! My wife and I demolished our debts from smallest to largest, because this method allowed us to get some quick wins. It doesn’t really matter. All methods work – if you first stop borrowing. 
Once your debts are paid you will stop paying interest. This will save you money. Once you start saving and investing the money you were paying in payments and interest, that money will start growing. Rather than working for money, your money will be working for you. How cool would that be? 
Well, now you know the amazing secret, the proven path to a fabulous debt free life! 
(You’re welcome!) 

The reduction of debt correlates strongly with the creation of wealth, and it all begins when you stop borrowing. What you do with this powerful knowledge is up to you.

Friday, April 27, 2012


It is important to celebrate your financial milestones. Keeping to a budget is hard work. Reaching savings and investing goals is a big deal. Paying off debt is exciting. Go ahead, plan a party!
Celebrating can take many forms. Anything from a shout of “Yes!” and a “fist pump” in the air, to a dinner out on the town, to a full blown luxury cruise! It depends on what you have achieved. The larger the goal, the larger the celebration. Just be sure that you don’t go into debt in order to celebrate, and be sure you don’t celebrate achieving your savings goals by spending half of what you’ve saved!

Here are some money events that I believe are worthy of celebration:

When you make and keep a successful budget for the first time – Celebrate!
When you analyze and reduce your recurring expenses – Celebrate!
When you pay off a credit card debt (and then shred the card) – Celebrate!
When you pay off a car, boat or RV – Celebrate!
When you reach a major savings milestone, whether you have saved your first $100, $10,000 or $100,000 – Celebrate!
When you get a raise, promotion or new job – Celebrate!
When you complete your education; whether college, technical training, MBA, or a certification program – Celebrate!
When you pay off your mortgage – Celebrate!
Why celebrate? Because you’ve earned it! Through work, planning and sacrifice you are closer to your goals. Just as each win brings a team one step closer to the playoffs, each time you win you are one step closer to financial independence.
I fondly remember the day when I checked my 401k balance and discovered that the value had risen to the 6-digit range. The first thing I did was tell my wife. The next thing I did was drive to the store to buy a really good bottle of wine to go with dinner. Celebrate!
I was just offered a new job. Hurray for me! After I complete my first week, my wife and I will go out to dinner to celebrate. I will order whatever I want. 
Someday, I will finish paying off my house. On that day, we will have a mortgage burning party in the backyard. The first thing we will BBQ is that old mortgage. Goodbye debt! Then, I’ll throw on the steaks and burgers. You are all invited to celebrate with me!
I’d love to hear about your money goals and how you will celebrate once you meet them. Please leave a comment below or email me at

Wednesday, April 25, 2012

Plan for Tomorrow, Enjoy Today!

If you have been following my blog, you know that I am big on savings, big on investing, and big on being debt free. This is how I live, and I’m happy to share it in the hopes that I might assist and inspire others to get their financial house in order. I offer this project as a public service. I’m trying to help!
There are some people who think that my way is unrealistic. Some say that my way is nervous, fear based, or too conservative. Too much saving! Too much sacrifice! Paying cash for everything is crazy! I recently had a dear, sweet women tell me, “Paying cash for a car is impossible!” Really?
I think the force behind the doubt is the idea that my way entails nothing but needless fear and sacrifice. I believe the doubters are missing the point. I don’t let anxiety drive the process. I want to enjoy my life now AND in the future. I drive the process with HOPE and JOY.  Any anxiety or fear that I might have felt along the way decreased as my confidence and wealth increased. This is a FUN trip!
Financial planning will sometimes entail sacrifice, but not to the exclusion of all else. You can still have fun, travel, eat out, and have nice things. You just need to plan for it, pace yourself, avoid debt, and know that sometimes you might need to delay gratification to meet a larger goal. 
Some people base their financial plans (or lack of) on the assumption of 100 years of sunshine. Not me. I know that rain will fall. I have an umbrella in my car. Does that make me an anxious person, a fearful person, a pessimist? No, it makes me a realist. It WILL rain. When it does, I’m ready. The rain will not be a big deal for me, because I anticipated it. 
The ultimate goal of my financial planning methods is peace, but we don’t wait until all goals are met to experience peace. We can find peace in the process, in the progress, in the little wins that start to add up. It is possible to enjoy your life now while also planning for the future. Just be sure the former does not completely eclipse the latter. And please, whatever you do, don’t believe that it is impossible.

Friday, April 20, 2012

Calculate Your Net Worth

A valuable exercise to help you determine if you are winning with money is to calculate your net worth.  This is a useful method to measure your financial progress. Your net worth is the value of all your assets minus the total of all your liabilities. For our purposes here, assets are anything you own – your house, cars, furniture, boat, jewelry, savings, etc. Liabilities are money you owe (debt), such as mortgages, car payments, student loans, credit card debts, etc. To be clear, your net worth should increase over time.
This is easy to do and will usually only take a few minutes, so give it a shot.
   1. Add up the value of all your assets. 
   2. Next, add up the value of all your liabilities. 
   3. Subtract the total of all liabilities from the total of all assets. 

The result is your financial net worth. 
Here is the net worth calculation from my friend Dan. He is 42, married, and has three kids. Your situation might not look anything like Dan’s, but that’s okay. This is just an example to show you how to do it, not to suggest what yours will look like. 
House: $250,000 (fair market value, check for estimate)
Car: $18,500 (fair market value private sale, check for estimate)
Savings account: $15,000 (actual account balance)
Furniture, appliances & house wares: $8,000 (okay to guesstimate here)
Artworks: $5,000 (estimated fair market value if sold)
401k: $85,000 (actual account balance)
IRA: $5,500  (actual account balance)
Mutual Funds: $27,800  (actual account balance)
College fund: $7,200 (actual account balance)
Total Assets: $422,000
Liabilities:  (actual account balances)
Mortgage: $196,500
Car loan balance: $7,500 
Credit cards: $3,200 
Home equity loan: $6,500 
Medical bill: $1,900  
Total Liabilities: $215,600
Assets of $422,000 minus liabilities of $215,600  = a net worth of $206,400.
It is worth noting in the example above that once this family retires all debt other than their mortgage, their net worth will increase by nearly $20,000 or 10%. Increase is the goal, so paying off these debts would be a good decision.

Marc’s Wealth-Building Advice

When making a financial decision – this includes any large commitment of resources (house, business, car, education) or smaller recurring commitments (cable, cell phone, club memberships, any payments) – ask yourself, “How will this decision affect my net worth? In 1 year? 5 years? 10 years? 30 years?" This is a useful exercise, because your net worth should (in a perfect world, or even in an imperfect world like ours) trend upward over time. It is valuable to get into the habit of making decisions that increase rather than undermine progress in this area. If a financial decision will negatively impact your net worth in the short term, you should proceed carefully. If a financial decision will negatively affect your net worth in the long term, then you should pause and reconsider.
Remember, financial net worth should not be confused with your actual worth. We are worth much more than our bank balances. One problem in our society is that we tend to attach too much of our personal worth to our net worth.  Don’t fall into that trap. Your money position is not the end all and be all of life. Net worth calculations are simply a useful method to measure your financial progress. 
As you save more, invest well and retire debts, your net worth will increase. As long as you are seeing an overall upward trend throughout your working life, you can take comfort in the knowledge that you are heading in the right direction for wealth building.
Yours in prosperity,