Finance – Chapter 3, Odds and Ends

  1. Good health is an asset. Good health is the most important financial asset you can possess. If there is a simple guide for good health, it must be Exercise and Moderation. You need to exercise and you need to be moderate in your behavior. However if you would like to live a hundred years, like I plan to, then you need to spend additional time learning in more detail what to do, and also additional time in doing what you learn.
  2. A good relationship is an asset. A good, stable, mature relationship with those whom you have a financial partnership (like your spouse and children) is the next most important financial asset you can possess. If you are having “family fights,” financial matters usually suffer and sometimes suffer greatly. Lawyers, court fees, separate accommodations and transportation all take their toll, both emotionally and financially. When my folks were young, there was a saying that “two can live as cheaply as one.” Implicit in the statement is that the two are living together. The statement was probably used to justify many marriages. If the two are breaking leases, getting separate accommodations and furnishings, driving separate vehicles and in general trying to “live well” (as in “living well is the best revenge”) the aggregate finances will really suffer.
  3. Keep learning for success. With the exception of jobs that cannot be moved, such as many service jobs (frying hamburgers, etc.) and construction; low skill jobs are going to keep moving out of the United States to countries with lower pay scales. If you saw the 1960’s movie The Graduate, you may remember the man counseling the new graduate with a single word, “plastic.” He was trying to tell the graduate that the future lay in plastics. I think now the word would be “electronics” or “communications.” According to Jay, electronics will soon become the largest “industry” in the world, displacing food production. And electronics has only been around for a hundred years or so. There are no signs of the industry maturing. There are now one billion telephones in the world, but wherever you look you can see system expansion. Do whatever you want to do, but be good at it. Do not learn the “tricks of the trade,” learn the trade.
  4. Keep track of the Cost Basis of your investments. Although it means the same thing, the Cost Basis is described a little differently for an investment like a house than it is for a security. For your house, the Cost Basis is the original purchase price, plus the cost of all of the subsequent improvements, but not maintenance costs. Examples; if you replace the garage door due to damage, it is maintenance. If you add a garage door opener, the opener is an improvement and adds to the Cost Basis.
    For a security, the Cost Basis is the sum of all of your purchases plus the “income” you have declared on your income tax statements, minus any (partial) sales you have made.The reason it is important to keep track of the Cost Basis of your investments and your house, is because it is how you figure your profit or capital gain, when you sell. It is an easy concept to understand, but difficult to figure unless you keep good records over a period of years, including your income tax papers. If you do not keep good records, you may pay excess taxes because you do not know any better or because the IRS caught up with you.
  5. Diversify your savings. Do not keep all of your eggs (savings) in one basket. Spread your savings around, a little. It is nice to work for a company which matches your saving in their stock or gives you a good deal in their Employee Stock Ownership Program (ESOP). Take the good deal, but remember when the company gets in trouble, your job may be in jeopardy at the same time as your savings are also.
  6. Check your Social Security Account. The Social Security Fund is probably not going to go bust, although it is presently being looted to help pay for the federal deficit. However, you may not be listed, or you may not be getting credit for your contributions. You need to check every two years to make sure that your contributions are being posted to your name and number. There are places you can get a mail-in form, but you probably can also call and request the information. (800-777-1213).
  7. Save Something. The median US family income in 1989 was $34,213. How are you doing? From a financial point of view, how well you are doing does not relate to how much you make, but how much you save.
  8. The federal budget will not be balanced. The Balanced Budget and Emergency Deficit Control Act of 1985, more commonly known as the Gramm-Rudman-Hollings Act, or simply the Gramm-Rudman Act imposed automatic spending cuts to end the deficit in 6 years (by 1991). In 1987, a revised act set the “balance year” as 1993. In 1990 the target “balance year” was moved to 1995. What do you think will happen to the “balance year” now? Hence my earlier suggestion that inflation and deficits would continue. The Social Security Cost Of Living Adjustments (COLAs) for the last 8 years were: ’84, 3.5%; ’85, 3.1%; ’86, 1.3%; ’87, 4.2%; ’88, 4.0%; ’89, 4.7%; ’90, 5.4%; and ’91, 3.7%. These numbers probably track inflation pretty well. It is encouraging to see both President Bush and Governor Clinton getting more serious about explaining their financial plans for the nation. However the federal budget will not be balanced for many years. (Neither of their plans are very comprehensive, but I tend to favor Bush’s as the lesser of evils.)
  9. Dollar Cost Averaging is a silly little procedure where if you buy the same dollar amount of an item as the price varies, then your “average” cost is lower than the “average” price. That is nice, but not as good as when the sell price is higher than all of the purchase prices.
  10. The world is getting better. With a few notable exceptions (like AIDS), there is a lot of evidence that the world is getting to be a better place. And AIDS is easy to avoid, just do not be promiscuous. About 100 years after Louis Pasteur discovered germs cause many diseases, Small Pox has been completely eliminated from the earth. My mother used to worry greatly about her 5 children getting polio, as polio crippled some children every summer. Now instead of worry, inoculations are available. Fifty years ago infections used to kill many injured people, now with penicillin, very few die from infections.
  11. Live below your means. There is no reason, other than lack of discipline, for you to spend everything you make.
  12. Give a little back to Society. Give a little money, time, your special talent, or even blood at the Red Cross.
  13. Get a will. I would not go out and contract a high priced lawyer to write a will, unless you have a special situation, but you do need a simple will to avoid problems for those you leave behind when you die, and we are all going to die. There is no other way to get out of this place. So get a will. If you do not, the state and lawyers may get most of what you leave behind.
  14. If you get money back from Income Taxes, lower your withholding. You may think it is a big thrill to get money back when you file your taxes, but get serious, what it means is that the government has been holding your money for you, without paying interest to you. Do some simple calculations and lower your withholding. Or send me a check for that amount every month, and every April I will send you last year’s money back.
  15. In finances, doing right is not difficult, knowing what is right is what is difficult. And I really cannot make it much easier. When watching the Stock Market, watch the percentages, not the numbers. Pick stocks (mutual funds) with a significant history (I use 10 years), you may miss a rocket, but also maybe a bomb.
  16. For some people religion is more important than money, and that is OK. That is a choice everyone must make for themselves. Uncle David had a bumper sticker which said, “If you love Jesus, tithe, any fool can honk.” Your religion can be an expensive budget item. It is up to you. I definitely will not tell you what to do in this area. I am not very religious, at least not in a “organized religion” way. Because of the following:
  • My great grandfather Gottfried Huebner left Germany due to religious troubles between the Catholic and Protestant (called Reform in Europe) groups.
  • My grandfather David V. Huebner left the Baptist Church of Lorraine, Kansas over an argument and subsequent fight about some girl’s honor.
  • My Graber grandmother’s family never spoke to grandmother again (in her life) after she and grandfather were married by his friend, whom her family felt was not the appropriate person, nor qualified, to marry them.
  • The good Protestant people of Bushton, Kansas would not let the Catholics build a church in the town.
  • The Catholics of Wilson, Kansas, after gaining control of the school board, fired my dad from his job as superintendent of the Wilson school system and hired a Catholic replacement (and the next year Glen, Jay and Ray helped our “new town” beat Wilson in high school football)
  • I have not seen any church go beyond its own ethnic origins.
  • The Catholic/Reform (30 years’) War cost Germany 10 million dead, of a total population of 14 million in the 18th century or
  • Here in the Middle East, we hear about and are exposed to the impacts of the Islamic holy wars and the Christian crusades of 1000 years ago. (Look at Yugoslavia.)

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