Tag Archives: Finance

Twelve Posts of Christmas Reinvented

The inspiration for these posts, quite obviously, is the traditional holiday song “Twelve days of Christmas”. It is a little tune that most readers are probably familiar with and that just may be getting stuck in your head right now. Sorry about that. The song is kind of annoying. But I guess it is interesting and mysterious enough to be a constant source of speculation around this time of year. Indeed, I am not original in repurposing this classic song.

For example, every year PNC posts the Christmas Index. This is an index using the items discussed in the song, adjusted for inflation. In other words, the Christmas Index comes out every year telling you how much you would have to spend today to get your true love each item on the “Twelve days of Christmas.” For a great read on the Christmas index, read this article. The index includes the birds and stuff as well as hiring the dancers and milking maids, etc. Not surprisingly, it is the cost of labor that makes the Twelve Days of Christmas so expensive for your true love.

Many out there have probably heard of the Christmas Index before, and it’s an interesting thing to run across every now and then. However, I recently discovered another take on the “Twelve Days of Christmas.” Author and researcher Olga Kazan has just come out with an article titled “Health Consequences of Actually Living the Twelve Days of Christmas.” This is a fascinating read that starts off with a scintillating history of the song and then launches into the effects of eating the Twelve Days of Christmas, which are surprisingly healthy if you remember to milk, dance, leap, pipe and drum as well.

This article also references another Twelve Days hanger-on… Heal Farm, out of England makes a stuffed bird (inside a stuffed bird inside another stuffed bird and so on…) using birds referenced in the song. Click on the link above to read more about the “12 Bird True Love Roast.” It’s a bit pricy, but it “[w]ill feed around 125 people, takes 10 hours to cook and yields around 4 litres of flavoursome stock.” Even at it’s steep cost, it is still cheaper than the Christmas price index. If you ever get one, please don’t forget to invite me!

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Shedding Light on the LightBulb Moment

Recently I had an article published on the website GetRichSlowly.org. This was an article similar to one published on my blog. Both were titled “Lightbulb Moment.” Not too surprisingly, GetRichSlowly.org had many, many more visitors and followers than LifeImproved.Org (for the moment) and many of those readers felt compelled to post comments. For the most part, people were kind, enthusiastic, and supportive. However, there were some comments that were irritated that I did not give more financial details, or that opined that since I admitted that we had healthy salaries that whatever accomplishments we shared were less than impressive. I get the sentiment. I mean, it’s a much more moving story when a single mother, working three jobs, making $30,000 a year claws her way out of crippling debt left by the death of her spouse. And her beloved poodle. Yeah. I, too, would be very moved by the story. We all love an underdog. Heck, we make movies and write stories about them all the time (See David and Goliath). And there is also something fascinating about peering into the minute details of someone’s life, especially if those details reveal something savory. The problem some people had with my article was that it was too… ordinary, I guess. But these people that wanted more juiciness missed the point of the article and the pulse of my message.

You see, when my husband and I first started our journey, we were nothing special. We were another couple, working on our careers, living in suburbia. We had purchased a house and new vehicles within the previous five years. These things we had “upgraded” as circumstances allowed, moving from our 1000 square foot town home to our 2000 square foot home and trading in our used, cheap cars that we had as graduate students to our new cars befitting our careers. We were moving on up, financing home improvement projects and furniture to fill our bigger home without giving it much thought. We weren’t out of the ordinary. In fact we were extremely normal. Every body was doing it. My generation and the generations around mine were expected to go out into the world and flex the power of our credit. We did not save up $15,000 to buy a decent car. We purchased a $35,000 car with no money down. And even when we could easily pay for a roomful of furniture by waiting and conscientiously saving for a couple of months, we were lured by 12 months free financing. As I have mentioned before, my husband and I always felt very responsible about our decisions because we never borrowed as much as we could have. We were somewhere between Ikea and Crate and Barrel and way south of the neighborhood of BMW and Mercedes. So it was kind of a shock to finally see with clarity that even though we didn’t borrow as much as we could have, that our were not very good financial decisions. By the time we went to see the financial planner in 2009, our debt to income ratio was almost 3 to 1–but our credit was outstanding!

I keep seeing this commercial for a certain large financial services company whose message is that seeing one of their bankers can make your life so much better. In the commercial, a couple is sitting in front of the banker and he asks them what they would like to do with some extra money. The husband immediately responds that he wants a motorcycle and the wife that she wants a remodel. This commercial is interesting for a couple of different reasons. First, the couple has no idea what they want, they just want to borrow more money to buy more stuff. And second, the commercial implies that the banker will help them each purchase both of the things that they desire, they just need to ask.

This brings me back to discuss the point of my article on GetRichSlowly.org. Taking on debt has become entirely too normal. And not just debt for the big, once-in-a-life-time things, like the house or your good family car. We finance dishwashers, and vacations and new cars before the other new car even has any equity. We worry more about our credit scores than we do about our ability to repay debt if anything changes in the precarious cash-flow game so many of us play. So that’s the heart of my story. It wasn’t an amazing feat that my husband and I paid off all of our debt. What was difficult was getting the point that we recognized that we were headed down the wrong road. We didn’t need to get to the point that we lost everything first and hit rock bottom in order swear off debt–though I agree that I probably could have written a tear-jerker of a story about it. I don’t need to see anyone else hit rock-bottom before starting to climb up, either. I will be impressed if you have a healthy relationship with debt and spend less than you earn. And I think that these kinds of stories need to be put out into the universe in order to encourage other people just like us to change their approach to debt so that they can really change the course of their lives.

Taking Stock

Since reaching the milestone of being debt free last year, my husband and I have been in a state of limbo. Right before paying off the last of our debt, we were one synchronized team, attacking a mutual goal with an unrelenting fervor. After that final payment, sure, we felt good, but we were left asking ourselves, “now what?” And quite truthfully, we had different opinions about where to go from there.

For example, I really wanted to use a financial planner. One that I trusted, that wouldn’t try to sell me products just to make commissions, one that would help with the planning aspect of our journey and would help establish our investment and saving goals, educate us, and would guide us through tax issues. I had someone all lined up.  We even had her come to the house and answer our questions about her services.  While my husband was willing to listen and be polite, he went into the meeting with the preconceived notion that there was really no way that we would end the meeting with him wanting to hire the financial planner.  You see, he had done some reading. Particularly, Bogleheads Guide to InvestingHe also listened to a lot of Dave Ramsey.  A lot of Dave Ramsey.

These advisors pointed out that financial planners cost money. And they emphasized that the amount of money that you will spend on the financial planner, even if it is only a small amount, could ultimately cost you hundreds of thousands of dollars due to not being able to invest that money and letting compound interest do its work.  This is a hard point to argue against.

While going through this process, what I realized was that we kept confusing an investment plan with a financial plan. Our financial plan was already taking form.  We would no longer take on debt, we would live conservatively, we would continue to decreasing our monthly expenses and work on maximizing our savings.  We also had definite retirement goals (dreams, really).

So, as outlined above, my husband and I already agreed on the financial plan.  However, it was the investment plan that confused and frustrated us.  We had no idea what to do with the money we were saving.  In the end I agreed to allow my husband to act as our investment planner. Does he have a degree in business, accounting, economics, finance, or any other business or investment related sector? No.  It’s in English, actually.  But, he’s a smart man (except when it comes to finding something). And, well, I do have a degree in economics, so I figured we could figure this out together.  He was willing to do the research.  I was willing to trust him (and cross check his data).

I am going to admit, though, that one of the biggest reasons that I was willing to have us muddle through our own investment plan was that the plan was not going to be complex. Very basically, our plan is to focus on very low-cost indexed funds with moderate risk, such as one would find with Vanguard or Fidelity. In fact, we ended up buying a fund of funds.  While a traditional indexed fund is already diversified in stocks, a fund of funds is diversified in stocks and bonds.  So we don’t have to worry too much about whether to buy municipal bonds, high yield bonds, junk bonds, or U.S. bonds.  We are not looking for the next get-rich investment.  We are not looking to discover something new that we need to invest in now, before the opportunity passes.  We are just looking for a good, somewhat safe place to grow our money with low costs.

This does not mean that we do not have  a lot of questions and many moments of indecision.  We do.  Fortunately, in this day and age, the internet provides a lot of really good information, as long as we can sort through what is genuine advice and propaganda.  And we have discovered that we are much more intelligent about investing than every day before.  While new questions continue to pop up, we continue to learn the answers.  Obviously investing can get incredibly complex, and, honestly, our investment plan is slightly more complex than outlined above.  As we understand more, the types of investment practices we can conquer expands.

I am glad we took this route.  Had we gotten a financial planner, we would not have been forced to learn all that we have.  We would have relied on someone else to tell us what we should be doing and we would not have understood half of it. Now we are taking control of our own (future) financial independence.