Today I Learn… I make a point of learning something new everyday. This is what I learn each day

1, Feb 16, 2009

Teaching Children Financial Discipline

Filed under: Money — admin @ 8:56 am

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?

1, Feb 7, 2009

A More Budget-Conscious Spending Behavior

Filed under: Money — admin @ 1:13 pm

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.

1, Feb 3, 2009

Never Pour All Your Money into Your House

Filed under: Money — admin @ 8:31 am

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.

1, Jan 28, 2009

Why Is Money Important? What does money means?

Filed under: Money — admin @ 8:49 am

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.

1, Jan 24, 2009

An Old-Fashioned Saying: A Penny Saved is a Penny Earned

Filed under: Money — admin @ 12:07 am

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.

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