KevinSauls.com

Let me say at the outset that if you are reading this blog for financial or any other advice, don’t. I am hardly an expert on any of the topics I might choose to discuss here. My purpose is simply to share with the reader my personal experiences, observations and thoughts regarding the various topics covered.

The web is an awesome place. On it you can find any information you seek, though it may take a bit of time to really track it down. The problem, though, is that while there are tons of valid, useful and accurate resources available, there are also many more times that number of sites whose information is of questionable usefulness, accuracy and validity. The simple fact is that when you go to your local bank and sit down with a financial planner, odds are pretty good that the person on the other side of the desk has some legitimate knowledge and experience with financial planning. But, when you turn to the web the person from whom you are getting advice may not have the educational and experiential background to provide you with valid information. You are reading this blog even though you have no clue who I am, what I do for a living (or even if I actually do work for a living!) and what qualifications I might have that back up the information I’m sharing.

While I read many blogs — including quite a number that address financial issues — I take them all with a grain of salt and a healthy dose of knowledge. You can do yourself no greater favor than to actually sit down with books from legitimate publishers and educate yourself on the basics of personal financial management. Then apply that knowledge to what you read online. Some of it you might find quite good and helpful, much of it you might find to be little more than one person’s opinion or generalization of one person’s experiences into “rules”.

When you understand the basics, you’ll be able to evaluate the latest “get rich” scheme, or “hot tip”. if you don’t understand how money works, you’ll be hard pressed to understand whether the scheme is legitimate, or designed to benefit someone other than yourself.

Second, know your writer. What are his or her qualifications? There seem to be quite a few “experts” out there who are self-proclaimed, for they have no formal training in the topics they write about. Now, to give the Devil his due, it is entirely possible for someone to educate himself to the extent that he might well be considered expert — but how would you know?

Finally, recognize that what works for one person may not only not work for another but may, in fact, have exactly the opposite result. There are few hard and fast rules when it comes to money management; you have to adapt your activities to what fits your temperament, talents and values.
Having said my peace now, I invite you to read my observations, thoughts and experiences as I begin my own journey toward retirement.

Today’s Atlanta Journal carried an article about the state legislature’s plans to drop the property tax on vehicles in favor of a one-time “title tax”. Sound appealing on first blush, but then I got to thinking about it.

As written, the law has a couple of problems that will work to continue the kind of consumerism that has brought about the current crisis:

• The new tax structure only applies to new purchases. Everyone else will continue to pay the annual property tax. This, of course, will encourage people to buy a new vehicle. That’s great for the economy (at least the economy of the auto industry) but encourages people to go deeper into debt.
• The “title tax” is capped at $2000. Sounds good, huh? Well, consider this: If you buy a $25000 car, you pay $1750 in taxes (7% of purchase). If you buy a $75000 car you only pay $2000 (2.67%). The upshot? People are encouraged to buy the more expensive vehicle – pushing themselves further into debt. One legislator, Tom Rice (R) chairman of the House Motor Vehicles committee, is quoted as saying: “The cap was designed … to induce people to buy up.” Yeah, Tom, that’s right. Let’s encourage people to continue to take on more debt than they can handle.

Not surprisingly, the Georgia Automobile Dealers Association is all for this. After all, it will stimulate lots of sales as “[p]eople might do the math and figure out they are better off buying a car”, said William Morie, president of the GADA.

Bottom line? Georgia Legislators apparently don’t really care about their constituent’s financial health. They want to continue the same kind of irrational spending based on credit that got us into the current financial meltdown.

Remember, it wasn’t just the housing market that brought it about, it was the entire system of credit. When we’ve extended ourselves beyond our ability to repay and just continued to dig the hole deeper.

And now the Georgia Legislature apparently wants to encourage us to do it.

To me, this is shameful. In the wake of the current situation, our government leaders should be leading the way in helping people recognize the stupidity of living our lives on credit. The government should be passing legislation that helps protect us from unsavory lenders. They should be providing education on how to properly manage finances and credit. Not encouraging us to go still deeper in debt.

Got an opinion? Write your legislator.

Source: http://www.ajc.com/metro/content/metro/stories/2009/03/14/legislature_birthday_car_tax.html

Wednesday’s news included an article about 12 insurance company employees winning the $212 Million dollar Mega-Millions Lotto. Somewhere I read that if taken as a lump sum the payout would be something like $171 Million. That works out to about $14.25 Million per person for each of those twelve people before taxes.

Winning the lotto or otherwise coming into a large sum of money is something that I think most of us dream of. And to be honest, I surely wouldn’t mind a little windfall myself. But Not $14 million. I’m not sure I’d want even $1 million.

Money is a double edged sword. We need it to get the things we need to survive and it’s nice to have a little “extra” to enjoy some of the luxuries in life.

On the other hand, though, having lots of money requires a lot of energy to manage. And I’m not qualified to manage it well.

Over on The Simple Dollar Trent relates a story about an interview in which the interviewer asked him if he wanted to be rich.  After thinking about it a few moments, his response was “no.” He went on to say that he only wanted to be financially independent.

Trent saw the realities of wealth. He pointed out the risks and limitations attendant with extreme wealth. Can Bill Gates or Warren Buffett spend an afternoon in the mall? Don’t you know that these men, because of their wealth and notoriety probably maintain a security detail of some type to protect them from the crazies who see opportunity in their wealth. Such are the “benefits” of wealth.

Rather than be freeing, allowing you to enjoy your wealth, the wealth becomes a cage, limiting your options and opportunities for a “normal” life.

For the lotto winners the problem is compounded by their lack of familiarity with handing wealth. Bill Gates, though he came from a fairly wealthy family as I recall, still had never encountered the kind of wealth he has amassed. But it didn’t happen over night. He was able to adjust and learn how to manage his wealth as he grew into it.

The same can be said for Warren Buffett and others. They weren’t suddenly blessed with lots of money, it came to them slowly. That gradual growth allowed them to learn how to manage and plan for it.

But, when you wake up one day with $14 million in your bank account, do you know what to do to manage it? Do you even know who you need to talk to for guidance? Can you trust them?

I like to think I’m a fairly knowledgeable guy, but I’ll tell you I wouldn’t have a clue what to do with that much dough.

And apparently neither do most lottery winners. that’s why so many are bankrupt in a few years; they don’t know how to manage it and don’t really comprehend how much money they have. It seems inexhaustible.

A couple of years ago Oprah did a show in which a homeless man was given $100,000. The question was: What would he do with it?

The answer: Blow it.

The lucky recipient bought cars and other things for others. Now that’s not a bad thing, giving to others, but he did it because he really didn’t have good understanding of the amount he had available. He said he was surprised when it ran out!

My girlfriend and I talked about it. She’s well educated and makes a decent living. When we started talking about what we’d do with $100,000 she starts off paying off her parents’ house and her house and so on. I reminded her that $100,000 was only a little more than twice her salary. She got a funny look in her eyes and said, “You’re right. I didn’t think about it that way.” Even those of us with a little bit of money believe that it will go farther than it really will!

I’ve said all this to say that these lotto winners have come into a lot of money. I hope that they are wise enough to squirrel some of it away and not on a buying binge or invest in some questionable enterprise. I hope that they seek good guidance and make smart decisions and really learn to understand the amount of money at their disposal.

Sadly, I expect they’ll be back in a few years working once again in their little cubicles to pay the bills they amassed during their time of wealth.