On 1/21, Saturday morning, while my daughter was still at Manhattan, KS, I went to an eye doctor for annual eye check. From there I went to Liberty Tax service to have an estimate of cost and the amount either we owe or we have overpaid on our federal tax.

The person serving me talked with Indian accent, punched in numbers into his tax return software, and in less than half an hour came back with the result. I was surprised to see his bill of over $300 for his service and that was after the coupon and discount. Plus, I was disappointed that he has not reduced the amount of tax that we owed. I know there must be some tax loops that I am not aware of and that can open a big door for shrinking tax dollars.

I thanked him and let him know that I would do some research myself to see if I could come up with a better deal. He looked unhappy and told me no matter where I went I wouldn’t get any better deal than this and in fact I should have paid more if without him. He kept talking while I thanked him all the same, and left his empty office.

I know this is the only time when tax preparers get most of their revenue during the whole year. It makes financial sense to maximize one’s profit during tax reason. Still, I can’t see why he charged over $300 for his half an hour work when he even failed to meet my expectation. I am not sure what I have learned from this experience but I think I did a right thing walking out of his office.

Continued from yesterday’s posting, well, an attempt at interpreting that piece.

Money functions like medicine. It can taste sweet, but it can make one feel hot or become toxic if one abuses it. Money can relieve a person from hunger, pull him out of hot water. On a large scale, money can help build a strong country. If taken well, corrupt officials will implement equal distribution of wealth. Otherwise, social unrest would arise.
…
If one accumulates money without spending or sharing it, one is prone to being robbed; if one spends all without saving, one is likely to suffer in time of urgent needs.

A taoist person (dao) both shares and saves his money;
A virtue person (de) does not view money as topmost important;
A fair person (yi) does not get more than what he gives;
A righteous person (li) does not ask for what is not his;
A benevolent person (ren) uses his wealth in charity;
A trust-worthy person (xin) takes care of his debt;
A wise person (zhi) is not impacted by money.

The above practices are the medicine to longevity. A person will live a long and healthy life if he follow these practices. Otherwise, one will suffer from weak will and poor health.

On 12/18/2011, when I talked to my mother over the phone, she shared with me this article from one of her readings. I will try to bring out English meaning tomorrow.

On 9/23/2011, I read online something like “Stars who went broke.” To be sure, I am not surprised when wealth parts company with the unwise. But still, it was a bit shock to see how fast people have gone from being millionaire to utter poverty. Here are the incomplete list of those yesterday’s millionaires.

Nicolas Cage–The Oscar winner, once earned $20 million, was forced to put some of his properties on the market after failing to pay $14 million taxes for several years.

Mike Tyson–The former heavyweight champion, who made $300 million over his career, once spent $2 million on a bathroom fixture, filed for bankruptcy in 2003 after accumulating $27 millions in debt.

Randy Quaid–The “Independence Day” star and conspiracy theorist, once made nearly $817 million, filed for bankruptcy in 2000 after his aptly named film bombed at the box office.

MC Hammer– The “U Can’t Touch This” rapper earned $33 million in 1991, filed for bankruptcy in 1996, told the United States Bankruptcy Court Central District of California that he was $13.7 million in debt.

Kim Basinger–The Oscar-winning actress filed for bankruptcy after an ill-fated attempt to own an entire town (find it on a map). She earned a $5 million paycheck for the movie “I Dreamed of Africa.”

Willie Nelson–The “Red-Headed Stranger,” who found himself in hot water with the IRS in 1990, released a hilariously titled album to help pay off the debt.

Scottie Pippen–The NBA Hall of Famer, who lost $120 million in bad investments and big purchases, left the courthouse in tears after winning $2 million in a 2010 lawsuit.

Teresa Giudice of New Jersey” star and her husband filed for bankruptcy in 2009 after accumulating $9 millions in debt.

Also see stories on Chris McAlister, Burt Reynolds, Heidi Montag, Toni Braxton, etc.

I am sure readers would appreciate the expensive lessons these insolvent stars have to offer through their real life experience. Now we are supposed to be wiser than them.

One of the documents that I have kept for many years is traffic tickets, not many of them though. Here’s one of them.

On 7/12/2005, at 11:24 noon, I was on my way to Shawnee Mission West high school, where my son attended summer school. I remember following a swarm of cars, feeling as safe as a group of tigers. At the intersection of 103rd and Grandview, a police siren suddenly burst out. I was looking around to see who was the unfortunate one.

This time I was that one. I noticed the cop was following me, so I stopped in the mid of traffic. He approached with a got-ya smile, asking for my driver’s license and insurance card, then handed me a speeding ticket for $77 for driving at 47 mph in a 35 mph zone. Whatever. How I hate that moment!

The fine has doubled now as this is one of their revenue channels. Just be careful next time if you don’t want to feed with your hard-earnd money this way.

On 5/11/2011, a summer-like afternoon, I took my daughter to eye doctor for her annual eye check. We waited for a long time and were seen by the doctor for a very short moment. The bill is over $200. Luckily, our insurance company picked up the large portion of it. With her orthodontics doctor, a brief check cost $150 out of pocket money.

That evening I took her to the main library where she would prepare for the AP exams with her classmate. While she was there, I toured the inside of the library and saw the display of beautiful ceramics. I saw this display before. It reminded me of the time when my daughter was in first year of high school, taking a ceramics class. To be sure, she enjoyed doing and was thinking of making and selling them. But that idea has remained an idea.

On the way back home that night, I told my daughter of two incidents. “For a great majority of people, it is difficult to make a few dollars, but so easy to spend it. For a tiny fraction of population, the opposite is true.”

On 9/26/2011, I told some of my colleagues that I had been car-shopping during the weekend. That started the conversation on car. I have learned that one co-worker owns an Audi, the other expressed the desire of buying one, but was deterred by the 6-digit price. To me, a car is nothing but a mean of transportation from A to B. I did not share with them my view, which might sound too foreign to them after all.

My idea of spending is this simple equation:
money = time; time = life.
Hence, the amount of money spent on something must be worthy of the amount of my time and life.

Nothing comes from nothing. You have to pay for whatever you desire. Comfort, luxury, vanity, and the final cost of money, time, life and health, all will balance out.

In my life, I compromise on many things, but never on time and some other major matters.

On 5/20, I learned of the breakup of a young relative of ours with his girlfriend. On one of their date out, the girl bought a purse for 20,000 yuan, one third of her annual salary. The boy said jokingly, “Wow, with this spending, I am not sure I can support you in the future.” The girl was upset and told her mother of his words. The would-be mother-in-law told her daughter, “It’s none of his business. We spend our money.” This led to the final breakup.

I shared the story with my daughter. She agreed the girl was too extravagant. “You don’t spend that much on a purse even if you made $600,000 a year,” she said.

As a parent, I see clearly the hand of the girl’s mother in the whole thing. Number one, she is responsible for her daughter’s wastful spending. Number two is the fact she added fuel to the fire over the boy’s words, which hurt the feelings on both sides.

Secretly, I was hoping the boy could be more tactful in dealing with the girl, then further down the road, educate the girl and gradually free the girl from the undesirable influence of the mother on her. Then I think it too much for the boy to assume the role of re-educating the girl when he himself is not as mature as his age.

On 8/11/11, some of my colleagues talked about designer bag by Michael Kors. One of them loves it so much that she plans to buy one of them. After that I went to the website to take a look at them.

Wow, one little box-frame bag, size 4″Height x 4 1/2″Wide x 3 1/4″Deep cost $1,595. Most of them cost a few hundred dollars each. I am simply blind to any charm that they claim to possess. Instead, I feel repulsed when I see the price.

I simply don’t understand why people are willing to squander their hard-earned money on these designer bags. Thanks to these loyal customers, these top designers can exist in splendid style, driving limousines in town, living a life free from any concern or any need to work for a living. Why do people have to fall for this trick?

This once again reminds me of the saying — the rich set the fashion; the poor follow with their money.

On my 7/16/2011 posting, I mentioned a high schooler working almost 40 hours per week at a grocery store so that he could make monthly car payment. I have realized that I need further explantion here.

Number one, it is highly commendable that this teenager earned his own luxury instead of asking his parents, so much unlike many Chinese children of wealthy second generation.

Number two, in case you do need money, this is what I told my children — make it in a creative way instead of working as a grocery boy/girl. Don’t ask me how to be creative. It is totally your job to find it out.

On 4/7/2011, I read an article from BBC new, “Money woes ‘linked to rise in depression’” Economic problems may be fuelling a rise in depression in England, it has been suggested, which seems to be a good thing for pharmaceutical company as they saw an increase of 40% of prescriptions for anti-depressant drugs such as Prozac over the past four years.

This is totally expected when all these things shower upon you at the same time– the loss of job, inability to pay your bills, the buildup of debts, the self-perception as a loser who cannot even support oneself or one’s family, loneliness when the loved one leaves, feeling of being trapped down below, helplessness and hopelessness…

It is so dreadful to be hit twice, first by economic downturn and second by depression. The best protection against this type of misfortune is to build your fortune, your financial security before crisis set in.

On 5/20/2011, I read an article “People Plan to Work Into Their 70s or Later” by Andrea Coombes. It was rather depressing to learn that “almost four in 10 workers say they’ll retire after age 70 — or just keep working… if they even retire at all, and a growing number of people said the recession will force them to work longer in life, a new survey finds.”

For some reason, the article reminds me of the scene in our chemo treatment room where so many senior folks work all their lives and finally reach their retirement years but are struck down by cancer. So pathetic.

To be sure, there are some who can afford not to work at an early age, but choose to stay on because they love their jobs. But for the majority, they don’t have this luxury. They work because financially they have to.

People may find various reasons for their failure to get ready for retirement, yet as far as I can see there are mainly two simple reasons.

Number one: they were not able to make big money. Number two: they have not been able to save enough during the springtime of their lives, even worse, they might have spent more than they had earned, resulting in negative savings.

On 5/20/2011, I read an article “5 Easy Steps to Becoming a Millionaire” by Erin Joyce. Here are the main points.
1. Only Marry Once, without Schwarzenegger’s out-of-wedlock trick.
2. Live Off One Income, save the other one.
3. Choose the Right Career, “self-employed people make up less than 20% of the workers in America but account for two-thirds of the millionaires.”
4. Put Your Money in Appreciating Assets
5. Don’t Live the Millionaire Lifestyle, especially for those who are not. Warren Buffett is your example.

On the same day, one of my colleagues told me of her high school child, who worked almost 40 hours per week at a grocery store so that he could make monthly car payment. This yields the direct connection between the amount of time one has to throw in and the material possession one desires to enjoy. I would throw in that amount of time for some cause much higher than a car. Unless I am doing something I enjoy, I would rather consume less and work less.

Continued from yesterday.

(2) “People will like me more: Overspenders may believe that a purchase will make it easier for them to connect with others. One woman in the study wanted to buy a house so that she could entertain and be more social, and thus find more friends.”
People attract others with their strong character, nice personality, wit and humor, and tons of success traits, not by with what they possess.

(3) “I’ll be more fun: Some believe that a purchase will make them more fun and fulfilled. A man in the study wanted a mountain bike because then, he figured, he’d become more adventuresome and interesting.”
It is so pitiful that people cannot create fun from what they have. Think of the moment when you go broke, unable to pay rent and bills or to put food on the table, and go homeless in the bitter cold winter night. Is that more fun?

(4) “It’ll make me more effective: The typical overspender believes that a purchase will make them better at a certain pursuit. Several in the study said that a new car would make them more independent and self-reliant.”
Independence and self-reliance are the qualities that one cultivate over time, not any purchase can accomplish this.

By the end of the day, if people cannot control their buying impulses, they can always find excuses to lie to themselves and to others until they go deep into debts and end up being as miserable as you can think of.

I never let go an article on financial discipline without calling my children’s attention to it. “Overspending: 4 Lies That Lead to Debt Problems” by Dan Kadlec Monday, May 9, 2011. I like the part when the author raises it to the level of impulse control and self-discipline. Indeed, this is all we need when it comes to buying the do-not-needs.

The problem with those heavily in debt folks is “they have unrealistic expectations for how material things will make their life better.” The author quoted a study done by marketing professors at the University of Missouri. The study summaries four types of unrealistic expectations common to overspenders, who buy things they don’t need:

(1) “It’ll make me a better person: Many overspenders believe a purchase will literally change them into a better person. One woman in the study was certain that cosmetic dental surgery would improve her looks and quickly render her more confident and successful.”
Nothing is more erroneous that this. We know that’s not how people become successful and no better person is made of any materials. I have emphasized to my children that they will gain confidence in themselves when they excel in something. No fine clothes nor rich decoration can disguise the stupidity of an empty-headed person, which nobody want to be known as.
To be continued…

Last weekend I read from the Internet about mistakes that parents are likely to make regarding teaching children on money management. Oh boy, all of them sound so familiar. Here are a few mistakes.

(1) Set no limit. One is lucky if one’s child behaves responsibly. Otherwise, one should set a weekly or monthly or yearly limit on how much a child is allowed to spend.

(2) Neglect giving life lessons in daily life. Of course, life lessons include money management. A child starts boosting his/her financial IQ right from home with the parents.

(3) Leave children out of the picture when you make long-term financial plans, considering children too young to understand or sparing them the burden of financial matters of the family.

(4) Fail to start a kid’s saving account and to give the kid an opportunity to manage his/her own finance.

(5) Fail to explain how credit cards and bank work. Actually, many parents themselves fail to set a good example in using credit cards.

I have to confess, at some point during my previous parenting, I have committed the above mistakes, one by one without missing any of them. I am glad to say I am getting better now, after enduring some irreparable losses. Hopefully, readers who are like me, will become wiser because of their previous mistakes.

Can’t believe half of the year has gone!

Last weekend I was reading the book Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth by Harv Eker, 2005. There is an interesting statement in the book. It is something like this, statistics showed that number one cause of divorce in America was money. Also see part of this article: “Why money is the leading cause of divorce”, http://www.highbeam.com/doc/1G1-18930297.html

This reminds me of an incident happened last weekend in my household. My son will come back for the coming long weekend. Since the other adult let his nephew drive my son’s car to his school, I said we needed to get the car back for my son. The other adult said, “How can we do this after we gave it to him? If our son needs to drive, he can drive my car and I can walk to the office.”

I have no doubt it would trigger conflicts if it happened in some families.

Last weekend, 3/14, I learned from a friend of mine that some of the Chinese that I know of just got laid off from Sprint’s recent massive RIF drive. Among them is a single mom with two young children. My thought has been with her all the time since I learned of the news. I know both of her children are like mine, involved in many extra curricular activities like music and sports. They also go to Sunday Chinese school here. How could she manage to pay her bills and all their activities now that she lost her job?

I have been to some of my friends’ houses before, with piano, treadmill, and plenty of toys, large and small, its crowdedness being so typical of average American families. I learned that some of them like shopping. I wish I had cash in hand instead of so many stuffs. Too bad this is only one-way traffic from cash to goods, that is, once you transform your hard-earned cash into stuffs taking up space of your house, you cannot convert them back to the same amount of cash you originally paid.

One of my neighbors often holds garage sale, trying to salvage some cash from all the junks that she once feels compulsive to buy — a rather time-consuming and futile activity. My children once commented how rich they were just from the amount of stuffs they bought. Wouldn’t it be a whole lot better if we had not bought these junks in the first place and not have to hold these garage sales?

Once again, bad economic time = good learning experience, only the tuition is too high for those who have to sell stuffs. I will make sure my children read this posting so that they can learn something without having to pay for the tuition. Cheaper by double.

Recently I have been writing a lot on economy or a bad one, not only because it is the focus of national attention, but also out of a genine concern for my children.

American-born Chinese children grew up in America, fully soaked in the American consumer culture — shop until you drop, enjoying while you can, as if it were their birth right to consume, being spoiled in every commercialized holiday.

I have long realized the folly, the wantonness, void of discipline, brainlessness, and short-sightedness of such consumer behavior, but have not been effective enough to curtail it.

It would be a shame if I failed to take advantage of current economic situation and pass some indelible lesson to my children. After all, recession of this scale does not come often, probably once in half a century. I remember a couple that I met back in Waco, TX, in 1984. The husband told me of his parents living through Great Depression. “They never wasted a tiny bit of bread crumb. They drilled the concept of thrift at every dinner table.” Isn’t that what we should tell our children?

My intention lies in seeing my children avert the senseless conspicuous consumption demonstrated by a retirement-fund-poor BMW-driver, the extreme irresponsibility headed by Uncle Sam down to nearly every household.

A parent can never over-emphasize the need for financial discipline and can never relax in educating the youngsters about responsibilities, starting as early as they can take it.

I talk with my daughter everyday about it and really have seen delightful change in her. “Do you think it makes sense to borrow and spend more money instead of cutting down cost when you are deep in red?” I asked her. “It is stupid!” The answer is always short and sweet.

It reminded me of the words from a little child, “But the Emperor has no clothes.” Who is really smart here?

On my posting 12/13/2008 “How To Put a Safe Brake on Teen’s Expense,” I wrote, starting from year 2009, I would put a cap of $500 on her total yearly expense on clothes and other luxury. This and the current economic hardships that my daughter has heard of so much lately have, to some extent, changed the youngster’s spending behavior, for the better.

Yesterday evening, Friday 2/6/09, we went to Town Center where she could not suppress the urge to try and buy some clothes. After trying some clothes, she really wanted to buy one or two, then on second thought, she held herself back, saying “It is still too expensive.” It is a little over $10, a hugely less expensive than what she used to buy in the past. The only difference this time is she will use her own money.

The teenager used to spend very much on impulse, making no distinction between need and want, much as I had emphasized this distinction to her. To be sure, a typical big spender is the one who wastes tons on impulsive purchases to satisfy the desire or want for more and more. Basically, we don’t really need that much, it is our want that is like a bottomless well.

When my daughter becomes this budget-conscious, I find her more like a Chinese than an American. What is the difference between the two? The Chinese are over-saving-under-spending while Americans are over-spending-under-saving. Some fun mathematics need to average this out (1 + 1)/2, in theory only.

Last Saturday morning, on our way to her art class, my daughter and I talked about those homeless people from foreclosure. I told her there were 3900 bank-owned foreclosed properties just in Kansas City. Imagine where the previous owners live now after moving out of their houses. They would be lucky if they had relatives, but we don’t have any.

My daughter said, “When I grow up, I will pay off my mortgage.” Well, good thing that she does not want to get into a heavy debt like our dear uncle. Still, remember it is not a good practice to put all your money in your house.

I have not read much on economics, but from my own experience and from what I have read so far, I feel a strong urge to share a few common sense with my children. I bet they have heard me talking about these all the time and have zero patience with me now. Still, here they are.

(1) Invest as early as possible so that money will give birth to more money. It is like the birthing of a baby, tiny at first but, given enough time, will be bigger than its parent. Time is one of the decisive factors. Don’t lost it.

(2) Diversify. Imagine what will happen if you put all your eggs in one basket and that basket suddenly smashes to a rock. You don’t need to be absolutely evenly balanced out. If you want above-average returns, you can invest a larger part of your money in high risk and high yield stocks and have a little bit ill-balanced investment. But never become too greedy to pour all in one basket.

(3) Do not pay off your mortgage before you have enough savings in reserve. Why? If you put all your money in your house without any cash reserve left, what would you do if you find yourself suddenly in dire need of cash? The only way to get cash out of your house is to sell it. Imagine how your life would be if you have to sell your house under that circumstance? The smart way is having money in both your house and your investment.

(4) NEVER spend more than your earnings, that is, living on credit, with an exception of your house mortgage. Always have at least 10% left from each paycheck either as investment or saving for a treat for yourself like a vacation or a trip overseas or to see your senile mom and dad before they become “dear departed.”

I wish I knew better and could offer them more advice in money management. These are the rules that I have followed and have found it beneficial to me. When they grow up, they might be able to hire professional financial counselors. Still, I wish they could give some attention to my words. Right now, I find it hard to get their attention, especially that of my son’s.

Here’s some random thought on the role of money in our lives and why we need to think twice before spending. We all know that money is not everything but nothing can be done without it. It cannot make one happy but one cannot be happy without it. Not so hard to figure that out, right? Here’s the twisted way of thinking about money or not that twisting.

(1) Money = time.
If you have money, you can choose between working and not working, between working full-time and working part-time. You certainly have more time for yourself if you choose not to work or work part-time. You can choose to spend time watching bird or waiting for a dog’s smile if you can afford that time. Or like the 25-year-old relative of ours, you can retire at age 40. If that’s the case and if you live up to 100 years, you have 60 years at your own disposal. More money = more time for you.

(2) Money = freedom.
If you have money, you have the freedom to choose where to live and where to work, like my children who are so eager to move to places like New York City, Boston, or anywhere that millionaires like to gather around. Or if you don’t like your job, you are free to leave and can afford to land any job you wish if you still want a job.

(3) Money = health
With money, you can afford to build a swimming pool in your backyard or basement and take a dive any time you want. Or enjoy a deluxe fitness club. Or have a personal fitness trainer to make your workout more fun and tolerable. I learned that some unemployed people have to give up some medically necessary tests and procedures for lacking of money. And it is a known fact that people at lower social level suffer from a large share of cancer morbidity and mortality.

(4) Money = comfort
With money, you can live in a spacious house and hire someone for your backbreaking cleaning and cooking needs. Or dine out anytime you please.

(5) Money = entertainment.
With money, you can travel anywhere you like, if that entertains you. Or drive a fancy car without worrying about gas price.

… and many many more possibilities …

Have you done exercise like this? A = B = C = D, if S = A, then we can say S = B = C = D. I know how preposterous it may appear. Try this exercise next time you want to exchange your money with some stuff in the store —

Known: money = time, freedom, health, comfort, and entertainment, therefore, the stuff you want to buy also = time, freedom, health, comfort, and entertainment. Ask yourself: is it as valuable as your time, freedom, health, comfort, and entertainment?

It is not just a penny saved = a penny earned, but = a fraction of time saved. That may be too much a challenge to some people’s imagination. At least we have some idea of the important role that money plays in our lives and give it a second thought when you are going to spend your hard-earned money.

I explained to my child about the dire situation our economy is in on our way home yesterday. By the end of our conversation, she came to understand why creditor nations have to keep US economy alive by constantly lending tons of money to us. She knew how we got ourselves into this mess in the first place, that is, Bush’s favorites — the two wars which both parties supported but neither realized the burdens of wars.

There is an interesting site that gives a running dollar costs of Bush War. Do a google search with this, costofwar_home and watch the cost being building up every second as I am writing, — rushing quickly to reach $600,000,000,000 and up and up.

I remember during my first year of English study I read something like this from a book on Ben Franklin, “A penny saved is a penny earned.” Yes, I feel so stupid and sound so much like a person in your history book when I quote something like saving a penny while I am witnessing billions of dollars dumping into a bottomless sea every second and non-stop, and knowing the wise politicians are talking about borrowing more without any intention of stopping this dumping.