Night Before Halloween
It’s the night before Halloween and you are without a costume! You show up at the Spirit Halloween store and can’t believe how much they are charging for this stuff! A Captain Jack Sparrow outfit for your son is $30, the little Little Bo Peep costume you’re eyeing is $60, and to make your husband a Ghastly Goul it’s $50! If you think the costumes are scary, just look at their prices!
An article on about.com gives the numbers collected by the National Retail Federation (NRF) on the business of being scary for a night. With a projected $4.96 Billion to be spent by consumers in 2006 on Halloween decorations, candy, and costumes; Halloween is currently the sixth-largest spending holiday of the year.
The NRF 2006 Halloween Consumer Intentions and Actions Survey found the following trends:
- 63.8 percent of consumers will celebrate Halloween this year, compared to 52.5 percent last year
- The average consumer celebrating Halloween will spend $59.06 on Halloween, compared to $48.48 last year
The article breaks out the 4.96 billion between decorations, candy, and costumes:
- $1.31 billion on decorations, an average of $15.63 for those planning purchases
67.0 percent of consumers plan to purchase Halloween decor
- $1.57 billion will be spent on candy, with 95.7 percent of consumers buying. The average consumer plans to spend $18.72
- Total spending on costumes, including children’s, is expected to reach $1.81 billion. Consumers plan on spending $21.57 on average and 34 percent plan to dress in costume
Why am I telling you this depressing news, that Halloween is getting more expensive every year? Because with the right timing you can use it put money in your pocket! The markups on costumes and dÃƒÂ©cor are huge and with the seasonal nature of the products, the markdowns begin quickly. Already, on the night before Halloween, the Spirit Store has discounted their items online 50% or more. You can find $80 decorations on sale for $30 and $130 costumes on sale for $50!
If you have extra cash and somewhere to store the loot, now is a great time to score some great bargains. Following the time tested strategy of buy low and sell high, I’d say now’s the time to buy. Load up on the deals and next Fall sell it on eBay.
What to Buy?
Since candy has a shelf life and the margins are pretty low I’d stay away from that. Decorations net a fair amount but they are harder to ship and take up more storage space. I’d go with the costumes. Statistics show they have highest total amount spent yet the smallest percentage of consumers are buying costumes. This translates to the highest per item per consumer, $21.57, and means higher profits for you. Plus they are easier to ship and people need new ones every year. Good luck shopping!
Hello Hong Kong
Based on the information from sitemeter.com, I have my first piece of circumstantial evidence of making a difference in someone’s financial journey. A search on Yahoo Hong Kong led a reader from Hong Kong to MoneySmartLife.com. They read the post “Achieve Financial Independence Week” sponsored by American Century Investments and left the site by clicking on the “Declaration of Personal Financial Independence“. This document is basically a contract with yourself, committing to follow the basics of personal finance.
One Small Step
I don’t know whether they printed it, signed it, or have started to follow through. You can lead a horse to waterÃ¢â‚¬Â¦.. My hopes are they signed it, stuck it on the fridge, and are starting with the first bullet point this week. I do know that this person may never have found the contract were it not for MoneySmartLife.com. Here’s to many more Declarations of Personal Financial Independence!
Principle 3 – Influence
What is the number one determinate of someone’s attitude towards their health? The family and environment they were raised in. Think about some of the common bad habits that people pick up from their family such as smoking, unhealthy eating, or lack of exercise.
The influence of our environment also determines our financial health. Do you talk about money with your family and friends? If so, is the conversation a learning experience or is it usually an argument or complaint session? If we want to improve our finances, we have to surround ourselves with positive financial influences that will help us learn the ins and outs of our money.
So how do we apply this principle? Start by looking forward. Don’t worry if you haven’t had great financial influences in the past. Start surrounding yourself with them today!
However you learn best, that’s where you should begin. If you’re a visual person, read finance magazines (Smart Money, Kiplinger’s Personal Finance), or blogs (PFBlog, Blueprint for Financial Prosperity, All Things Financial). If you’re an audio learner, listen on the radio or to an audio book (Dave Ramsey, Suze Orman). If you need human interaction, find a friend or relative. If you don’t know anyone you’d trust financial advice from, join an investment club (Better Investing) in your area, and ask lots of questions!
Read about the next principle of Finding a Mentor.
What Bright Spots?
We keep our emergency fund in an ING Direct account and are emailed the ING quarterly newsletter called Bright Spots. The October 2006 edition contained an article titled, “Don’t let debt get the best of you”. Although it does include 7 tips on how to combat debt, the article paints a bleak picture, one that does not seem to offer many “bright spots”:
“The Federal Reserve Board just reported that American consumer debt is now at a record $2.17 trillion. For the first time in history average Americans owe more than they make. ABC News recently reported that in the last decade, while the average family’s income grew by 9 percent, credit card debt has increased 81 percent.”
Forget the Joneses
The newsletter does follow this up with a motivational message from President and CEO Arkadi Kuhlmann titled “Forget the Joneses”. It emphasizes the virtue of saving vs. spending and congratulates ING’s customers on opting for the saving route. The concept is similar to Dave Ramsey’s message, “Live like no one else, so you can live like no one else”. Basically take care of your finances now so you can reap the rewards in the future. At that point, the unfortunate Joneses will be seeing the error of thier ways, and you’ll probably be enjoying life.
I suppose the “bright spot” I take away from this newsletter is that a large company is attempting to raise financial awareness about saving vs. spending and debt levels. The question to ask ourselves: What can we do individually to inform others of the dangers of debt and motivate them to avoid it?
The Biggest Loser
I caught the end of a reality TV show tonight called “The Biggest Loser”. People on the show learn to change their lifestyle in order to lose weight and regain good health. With a simple plan of diet and exercise, they change their lives. The person that loses the most weight, wins the competition.
The Biggest Saver
What if there was a show called “The Biggest Saver”? What if we had someone weighing us in financially every week on national television? How much more accountable would we be with our personal finances?
The unfortunate thing about financial health is that unlike being overweight, you can’t always judge a person’s wealth by looking at them. If someone can’t fit into their pants, it is obvious to everyone. However, someone could be spending every penny they earn to pay for nice clothes, expensive cars, and a big house. To others, they come may come across as well to do, when in reality they are two weeks away from a financial heart attack.
Appearances can be discouraging for those that decide to make a change and get financially fit. If you lose weight, it shows. People offer compliments and ask how you did it. However, if you hit your savings goal 3 months in a row, no one knows. There are no compliments; you don’t feel any different physically. For this reason, the journey for financial health is often driven largely by internal motivation.
Keys to Success
Why are the people on the show able to lose 30-40% of their weight in a short period of time?
- They have a mentor. Someone encouraging them and keeping them motivated to push on when things get tough
- They follow a system. They’re shown a simple system of diet and exercise.
- They have the support of a team. It’s not them against the world. They have others to turn to for motivation and advice
If you can incorporate the above keys to success into your financial journey, I guarantee you will make great strides towards your financial goal; you will become the “Biggest Saver”!
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Principle 2 – Motivation
This principle actually helps determine our application of the Behavior principle. We need something to motivate us to change our behavior. Often, the reason we do the little things in life is to help achieve the big things.
We need motivation to get up and exercise every day or to avoid unhealthy foods or habits. We also need a motivation to avoid over spending and promote savings and investing. This all comes from some type of vision. For physical health it may be fitting into our swim suit next summer or lowering our blood pressure. For financial health it could be buying that boat we’ve always wanted or quitting our job.
If we can find our “Why”, our Motivation to change our Behavior, then we’re on the right path. One warning, a goal is not good enough. It inspires us until the goal is met, then we flounder. What is required to continually motivate us is a vision.
Goal vs Vision
For example, a physical health goal might be to lower our blood pressure. A vision would be to live a healthy life so that we’re around to meet our great grandkids. A financial health goal could be to save up enough to pay your kid’s college tuition. A vision would be to create a foundation that would fund the continuing education of the next two generations of your family.
The goal is reachable. What will keep you motivated once it is reached? The vision has a much larger scope and may even seem unattainable. However, this challenge, this dream, will keep you striving towards success. It will motivate you to change your Behavior to achieve your vision. Stay tuned for the next principle, Financial Checkup – Influence.
Good News / Bad News
The Houston Chronicle reported that social security checks will be going up by 3.3 percent in 2007. The cost of living adjustment is good news for many people that are depending on Social Security as part of or all of their monthly income. The increase will provide more money for health care, energy costs, food, and other living expenses.
The bad news is that the trustees of the Social Security trust fund predict the system will be broke within the next 40 years. To all of those that have been paying into Social Security, this means they will never see the promised benefits of the money they contribute.
An article entitled, “Misleading the Public: How the Social Security Trust Fund Really Works” does a good job of explaining how the Social Security trust fund is really just an accounting game being played by the government. The politicians have been borrowing from the trust fund and using payroll taxes to fund the money that is being paid out. As baby boomers retire, the dollar amount going out of the system will exceed the amount coming in. At that point the government will have to start to pay back over $1 trillion it has borrowed from the trust fund.
For the generations following the baby boomers, the problems of Social Security have both immediate and long term effects. For the immediate future, we will be paying more taxes. According to a recent announcement by the government:
11 million taxpayers will pay higher taxes next year because the maximum amount of Social Security earnings subject to the payroll tax will rise from $94,200 to $97,500. In all, an estimated 163 million workers will pay Social Security taxes in 2007.
The long term effects are even more drastic. By the time we reach our late 60’s we will have paid thousands or hundreds thousands of dollars into the system and will receive none of it back. We will not have a social security net to catch us as we age and slow down. There will be no one to look out for us but ourselves.
The politicians making “reforms” now won’t be the ones holding the bag when the time comes. Now we must take matters into our own hands. Armed with the knowledge of what’s to come, our only option is to prepare. What can we do? We have to increase the amount we save/invest for the future and reduce the amount of taxes we pay.
Stowers Innovations and American Century Investments have teamed up for the 2nd straight year to promote “Achieve Financial Independence Week” during the 3rd week of October. According to the website, www.afiweek.com, the goal is to “help raise Americans’ awareness of their own spending and saving habits, and provide people of all ages with the strategies and information they need to achieve financial independence.”
What a wonderful idea! Of course, ideally, people would focus on their financial independence every week but raising awareness of it every year is a good idea.
Contract for Success
The site provides a personal contract they call a “Declaration of personal finance independence“. People can print it out and sign it, committing themselves to follow its principles. The first step of achieving a goal is to put it in writing. Well, they’ve already done that for us, all we have to do is sign it, AND mean it!
The contract addresses issues such as financial priorities, credit usage, budgeting, emergency planning, saving, and investing. If we can just follow these basic principles, we’re on the road to a money smart life!
Principle 1 – Behavior
Managing our behavior is the first step to good financial and physical health. My dad is a family practice doctor. He can offer preventative counseling, diagnose his patient’s problems, give them tools and steps to improve their health, and monitor them with regular checkups.
Despite all of the help he provides, many of his patients still struggle with their health issues. Why, because they don’t change their behavior. He lays it out for them, all they have to do is follow his counsel, but unfortunately many of them don’t follow through.
Many of us have similar problems with our finances. The basics of personal finances are all around us in books & magazines, on television, on the radio, and on the Internet. We can choose to take advantage of this information or not. As I see it, there are two behaviors that prevent us from being financially healthy:
- We don’t go to the “financial doctor” for our initial checkup. We’re overwhelmed or uninterested in the topic of our finances. We have a mindset that we can’t or don’t want to learn more and we don’t seek the knowledge or the help of professionals.
- We don’t build and maintain healthy financial habits. You could say that we don’t visit our “financial doctor” for regular checkups. We may get started but are distracted or discouraged and don’t continue.
Stay tuned for the next principle in Financial Checkup – Motivation
Donald Trump and Robert Kiyosaki teamed up to create a book (Why We Want You to be Rich: Two Men – One Message) that looks at people’s different perceptions and approaches to wealth. This book was just released so I haven’t had a chance to read it yet. From what I gather it covers how the lack of financial literacy in our country combined with the way people think about money prevent many of us from becoming wealthy.
I caught an interview of these two on Larry King Live last night talking about the launch of their new book. As I expected, they re-iterated the problem of how schools don’t educate our youth about money, how to make or manage it. Another thing they mentioned that caught my attention is that most finance books are about living below your means. They took a different approach with their book and talk instead about expanding your means. I like this concept; it leads to an abundance mentality. Rather than focusing on making your life fit into the resources you have, concentrate on expanding your resources to fit your life.
When Larry King asked them to define being rich, Trump responded that being rich is a state of mind. I agree with this definition, if we can appreciate the blessings we already have we’ll feel rich. Add to that having the confidence that we’ll be successful and a vision of success and we’re on the way to being rich.
Kiyosaki responded to the same question with, “Forbes defines being rich as having 1 million dollars a year in passive income”. This definition is definitely more specific, if you can hit that number then you’re rich. I think a key point is the fact that it’s passive income. This is where financial independence comes into play. You can spend your time pursuing your passions in life without having to work for someone else to pay the bills.
Pearls of Wisdom
When asked what advice they would give to the average person, Kiyosaki emphasized the importance of getting started. Everyone has to start somewhere; he talked about starting small and building on your success.
A piece of advice that Trump gave was to do what you know and love. If you create an enterprise based on something you’re passionate about you will put in the time and effort required to make it a success. Another point he made about wealth was emphasizing not only what you earn but preserving those resources. He talked about people he knew that made a lot of money but didn’t consider what happens if that income stopped or dropped dramatically. I think this is a problem many of us have that has gotten us further into the rat race.