Control Your Cash Mailbag!

Financial freedom for the price of a stamp

Financial freedom for the price of a stamp

Real letters from real readers. Send yours to info @ ControlYourCash . com.

Dear CYC:

My fiancé and I are getting married! We know that destination weddings can get expensive, so we’re going to do it close to home. The problem is that he and I can’t come to an agreement on some of the most basic parts of the wedding. Like the venue. I want to hold the reception at the ballroom in a local 5-star hotel ($12,000), while he wants to do it at his father’s yacht club ($13,000, but my fiancé claims the view of the lake is awesome and there might be a party boat involved.) Which do you think is better?

Sincerely, Melinda in Broken Arrow

 

Dear Melinda:

None of the above. Either is a giant and needless expense.

Here’s how you do a wedding, assuming you’re not a trust-fund punk. First, go to the county clerk and get a marriage license for $60 or however much it costs. Then pay your priest/minister/rabbi whatever his going rate is, which is probably not that much. Finally, hold the reception at one of your parents’ houses. If your mother and mother-in-law want to help they can go to Costco and buy those giant packs of hors d’oeuvres.

One more thing. It’s probably too late for this, but don’t register anywhere. Find a tactful way to say “cash gifts only” to your invitees. One way to handle that is to just say nothing, and when they realize you aren’t registered they’ll probably take it upon themselves to discreetly hand you an envelope at some point during the evening. You might even end up making a profit on the deal. But yeah, do it on the cheap. This is one place where frugality makes tremendous sense.

 

Dear CYC:

My fiancée is driving me crazy. She’s already made a non-refundable $6000 deposit on a ballroom for our wedding, and let’s not forget the $5000 I spent on an engagement ring. I make $40,000 a year. And now we’re – I wouldn’t say arguing, but heatedly discussing such details as the wedding invitations. Did you know engraved vellum paper goes for $1.50 per invite? Multiply that by 200 and you can see what just one of our problems is. Beef medallions on the dinner menu vs. chicken for $1 a plate cheaper, it never ends. What do I do?

Sincerely, Brian in Broken Arrow

 

Dear Brian:

$11,000 in sunk costs already? Man. Another $7 won’t kill you, so you should buy our book and figure out how to build wealth instead of destroying it.

Also, it’s 2013. Why are you sending invites via any medium other than email? You know how much an email invitation costs, right?

Are you going to be one of those couples who never talk about money until it’s too late? It’s cool if you are, just know that you’re already well on the path to sitting across from each other at the kitchen table a couple years from now, she furrowing her brow and you staring at the readout on a Casio printing calculator, wondering why you’re so broke and whether you’ll have to move into a studio apartment once the baby arrives.

 

Dear CYC:

Well, your advice is certainly condescending. And unrealistic. You seriously expect me to have a discount wedding? Should I get my dress from Goodwill while I’m at it? Maybe you don’t understand how important this is and how deep our love for each other is. My wedding is going to be THE most important day of my life, and the idea of it being no more ceremonial than a Super Bowl party is offensive to me. I asked you a simple question about one venue vs. another and instead you start pontificating. Thanks for nothing, ass.

Sincerely, Go to Hell

 

Dear Melinda:

Why did you ask for advice if you didn’t want advice?

Let’s do this Socratically. Would you say that most people a) worry about money, or 2) live with the freedom of knowing that they have sufficient cash flow and a big enough nest egg to see them through anything – financial independence, to coin a phrase?

This part of our conversation is unilateral, but we’ll answer for you. Obviously the answer is a). We’d guess that they outnumber the people in the other category at least 9 to 1. Now…would you believe, or at least be open to believing, that there might be a correlation between the plurality of people who have traditional weddings, and those who end up in the first category?

This is the ultimate in short-term thinking. Your wedding day. DAY. Singular. One of maybe 25,000 you have ahead of you. Why on earth would you focus all your attention, and undue money, on a single day when doing so means hampering your ability to build wealth over the remaining 24,999?

If your answer is “Because every girl dreams about her wedding day and I’ve been fantasizing about this since I was playing with Barbies,” then you’re a moron. It’s a non-repealable law of the universe that you can’t have it all. Everyone has to make choices. Even the biggest individual expenditures are done with respect to other possible outlays. Carl Icahn just borrowed $5.2 billion to attempt to take over Dell Inc. He didn’t go for Lenovo, or Acer, or even a company that does something other than manufacture computers. Icahn thinks that’s the way to get the best return for his (or his lenders’) money, so he acts accordingly.

We know what your objections are before you make them. How can we compare something as cold and utilitarian as a business deal to the magic and emotion of a wedding day? Because whether you choose to accept it or not, when you indebt and/or impoverish yourself to get married, there’s still a transaction. Multiple transactions. And as far as the people on the other side of them are concerned, business is business. The wedding planner, the hall, the florist, the caterer, the DJ etc. all get paid. In money. By you. And your heirs, if you let your bills sit long enough.

Also, the math doesn’t work out. You’ve got at least a 40% chance, conservatively speaking, of getting divorced. Yeah, we know. You two are different. (Also, we don’t know why the Centers for Disease Control with its $11.3 billion annual budget, an agency originally created for the narrow purpose of fighting malaria in the Southern United States, ended up being the nation’s official recordkeeper of marriage and divorce statistics.) An average wedding costs around $26,000. Even the most degenerate gambler in the world wouldn’t place a $26,000 bet on a game where there was a 40% chance of losing it all and a 60% chance of…well, still losing it all.

It is astonishing how many adults we meet who insist on handicapping themselves at the onset regarding money. Everyone with even a passing interest in personal finance will tell you how important it is to save early for retirement – why, if you just sock away an extra $10 a month starting when you’re 21 instead of waiting until you’re 40 you’ll have a billion more when you turn 65, or something. Yet none of these people will advocate something more obvious and even more impactful: Not blowing $26,000, and forgoing the assets that that could buy.

Still, most people aren’t going to listen to this. For a completely unrelated reason, most people aren’t wealthy.

Real Answers To Largely Real Questions

 

Male bag. Thank God Dwight Eisenhower and Ted Williams aren't alive to see this.

 

 

Dear Control Your Cash:

We came into an inheritance of about $130,000. We paid off all our credit cards and deposited $100,000 in two credit union accounts that each pay 3% on deposits. The balance sits in a non-interest-bearing regular deposit account. Our income takes care of all bills, with a modest margin for savings and/or the occasional repair, travel, etc., without requiring commission income from my job. That situation should be stable for the next 5-10 years (famous last words). In this economic environment, where would you put the cash sitting in the credit union account?

Abigail
Phenix City, Alabama

 

Dear Abigail:

How much is sitting in the regular deposit account?

Control Your Cash

 

 

(no response)

 

Dear Abigail (continued):

Okay, fine. Can’t be more than $30,000.

Put 3-6 months of expenses in the best savings account you can find. Try ING. You can buy a CD, but you can probably get an interest-bearing account that pays a similar rate without locking up the money.

Let’s take a look at Bankrate. Right now, the best 3-month CD rate we can find on there, among banks that don’t require a minimum, is Ally’s .39%. Ally’s own money market and savings accounts go as high as .84%, again with no balance required.

Put the rest in TIPS – treasury inflation-protected securities – and index funds. Vanguard is great for index funds because they keep their fees low and have lots of choices. Here are a few that might work, in descending order of how highly we regard them:

REIT index fund
Total stock market index fund
Total bond market index fund

The REIT fund invests in real estate investment trusts only. Buy in, and you’re holding pieces of companies that own pieces of buildings. $3000 gets you into this fund that has a low expense ratio and that pays quarterly dividends (which totaled 44¢ a share over the past year.)

One positive to the REIT fund – or negative, if you have different objectives – is that it’s got far fewer components than your standard stock fund. The REIT fund has only 112 components, a dozen of which comprise half its value. You’d expect this fund to have relatively few components, since there are far fewer REITs for a REIT fund to be composed of than there are stocks that could make up a stock fund.

The stock fund, on the other hand, has a little of everything. 3319 components, to be precise. When Vanguard says the fund tracks the entire market, they mean it. The fund’s top 10 holdings make up only ⅙ of its value, and those holdings are as big relative to the fund as they are to American commerce itself: in order, those stocks are:

Exxon Mobil Corp. 58,095,543 $4,924,178,225
Apple Inc. 11,077,447 $4,486,366,035
International Business Machines Corp. 14,269,978 $2,623,963,555
Chevron Corp. 23,932,734 $2,546,442,898
Microsoft Corp. 90,097,291 $2,338,925,674
General Electric Co. 126,658,602 $2,268,455,562
Procter & Gamble Co. 32,835,015 $2,190,423,851
Johnson & Johnson 32,743,485 $2,147,317,746
AT&T Inc. 70,807,116 $2,141,207,188
Pfizer Inc. 93,224,076 $2,017,369,005
Google Inc. Class A 3,037,566 $1,961,963,879
Coca-Cola Co. 24,691,491 $1,727,663,625
Wells Fargo & Co. 59,932,087 $1,651,728,318
Philip Morris International Inc. 20,987,803 $1,647,122,779
JPMorgan Chase & Co. 46,588,007 $1,549,051,233
Intel Corp. 62,741,843 $1,521,489,693
Merck & Co. Inc. 36,811,418 $1,387,790,459
Verizon Communications Inc. 33,826,667 $1,357,125,880

 

Finally, the bond fund. It deals exclusively in “investment-grade” bonds, 70% government, the rest corporate. It holds pieces of 4,301 bonds, most of it Fannie Mae and Freddie Mac. (Which, curiously, Vanguard regards as government bonds. Even though Fannie and Freddie are officially private enterprises. We’ve talked about this before. Last month in, fact.)

Either way, you’re doing fine. Look at the returns on even the most conservative choice here, and compare it to what you were making in credit card interest payments.

We’ll say it again – a huge part of building wealth is not destroying wealth. There are a million places to make the analogy, but constructing a skyscraper is a hell of a lot easier if you aren’t setting fire to the building’s foundation every night.

Dear Control Your Cash:

Tax time is coming up. I get my taxes done at Jackson Hewitt, in the mall, because addition and subtraction are hard. And don’t get me started on multiplication and division. Besides, I’m more of a left-brainer. Numbers are soulless and have no place in a creative person’s life. Did I mention that I’m an artist?

Anyhow, I’m expecting about a $500 refund this year. (Yes!!)

So should I get a refund anticipation loan? The tax preparer told me that I’d get the money immediately, instead of having to wait a few weeks for my refund like I normally do. It’s my money, I shouldn’t have to wait for it, right? So unfair! What do you think?

Erika
Scottsdale, Arizona

 

 

Dear Erika:

Thanks. A little comedy always livens up the mailbag. Of course you shouldn’t have to wait for your money, which makes us wonder why you authorized the federal government to confiscate it from you in the first place, only to return it to you with zero interest months later. What Jackson Hewitt squeezes out of you is yours and their business, however. Read this, if you can do it without drooling on your keyboard.

 

Got a question for the CYC mailbag? Email info@ our URL.

The Control Your Cash Mailbag, Part II of II

You missed Wednesday’s Part I? Here it is.

Continuing where we left off, here are more questions from confused CYC readers. Get your questions in to info at Control Your Cash dot com.

Free to make. Expensive to keep up.

 

Dear CYC:

I’m 31, my husband’s 33, and we’ve decided that we’d finally like to start a family. However, wouldn’t you know it, he just got laid off from his $42,000-a-year job. I don’t really have a question, just a couple of statements. Thanks. Love your blog!

Sincerely,
Katii in Des Moines

Dear Katii:

You do understand that children cost money, right? Regardless of the countless non-monetary benefits they bring to your life (sleepless nights, filthy undergarments, permanent supervision, constant screaming for attention, the potential for physical catastrophe at every turn), they come with a financial obligation that’s impossible to ignore or cut corners on.

So yes, get pregnant as soon as possible. Maybe you’ll be blessed with twins. As for secondary concerns like your cash flow having dwindled to zero, you can worry about those later. Besides, there are always credit cards: most people don’t come anywhere near their spending limits. That’s thousands of untapped dollars, right at your disposal. Knock yourself out.

Dear CYC:

I started at my job 3 years ago (district representative, golf and tennis equipment sales) and have yet to see a promotion. My figures are consistently in the top 40% of the company. I thought I’d be a regional manager by now, but I’m still waiting. It’s almost like they’re daring me to look elsewhere, where my talents will be more appreciated. In August I asked my boss about a promotion and/or pay increase. He hasn’t gotten back to me. Should I leave him another message, or should I try the HR manager instead?

Sincerely,
“The Chadder” in El Cajon

Dear The Chadder:

You mean your boss didn’t rush to you to say “What we can do to keep you happy, and keep you here?”? If he needed something from you – a sales report, receipts from your last business trip, a status update on your new intern – he’d ask for it instead of waiting for you to volunteer it. That he’s not doing the same thing with your salary increase request should tell you something. Maybe you can’t figure out that by “something”, we mean “he doesn’t want to give you more money.”

And why should he? You think you deserve it, but what leverage do you have? Your boss can either pay you what he’s paying you now, or pay you more, but either way he still has you as an employee. So he has no incentive to choose the latter.

Your choices are not only greater than you think, but different than you think. Forget about memorizing his lunch schedule so you can catch him in the hallway for a salary discussion. You’re going to have to do one of the following:

Line up another job and threaten to walk (this is the least good idea, because it’ll put you in the same position, just with a different company.)
Venture out on your own. Spend $500 registering with your state governing body and incorporate. But as what? A sports equipment wholesaler? Something completely unrelated to your current gig? We don’t know all the details of your situation, but right now you’re at the mercy of someone whose job description includes trying to pay you as little as possible. You need to be at the mercy of yourself.
All that money you spend on liabilities, rather than assets, is keeping your options limited. There are people who spend hundreds of dollars a month on alcohol and other entertainment expenses. A little discipline exacted over a short period can turn that money from a negative into a positive. Instead of going out with the fellas or buying a gaming system, earmark your spare cash for a down payment on some real estate, a residence, or maybe part of a commercial building. Find a realtor to find you a renter. Get the latter to indirectly make your mortgage payments. Invest the surplus if any, and take the tax deduction. You just need to think beyond putters and ball retrievers.

Sorry, we just don’t have the stomach for a Part III. Next month.

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