Money Questions

Money seems to be a theme these days and I was just pondering some stories of windfalls and shortfalls in the last week that I thought I'd share.

Not too long ago a friend of mine divorced her husband who was lacking in money management or career skills. Having three children, they civilly split their (her) assets and she and I joked that essentially she would be paying herself child support for the next several years out of her newly enlarged and re-financed mortgage and her halved 401k plan. Or so we thought. Because although her husband walked away from the divorce proceedings with a healthy 6 figure check, it was GONE in less than 5 months and his checks to her for child support were bouncing. We kept laughing (cuz what else can you do) as she realized how much it cost her to buy her freedom.

Someone I know is renting a property to her niece. This niece originally was renting the property with her mother (don't try and follow the relationships, it has no bearing here) but tragically her mother passed away suddenly. In addition to the horrible and unexpected loss of a family member, this also presented two money issues - the first was that a stream of income was lost which put the affordability of the rent into question, the second was an eventual death benefit payment which could have afforded a 6-month pre-payment of rent. Needless to say, this story is coming to an unhappy ending where the death benefit has been frittered away (rumors put it in bad investments, inappropriate gifts to boyfriends, and god knows what else) and nearly three months have gone by without rent payment. This leaves all family members in a bad position - one needing the rent to cover the mortgage and other costs, one being in debt to her landlord/relative, and both in a position of needing to change arrangements with a potential loss of income and worse - family strife. So I guess it just goes to show you mixing business with family is just not a good idea.

Another friend of mine had her privately owned company bought out a few years ago by an equity company. The windfall to the owners was so large that they determined they would share some of the money with their senior management - she received a 6 figure check! She paid off the mortgage on her modest small home, paid off the mortage on her little lakeside cabin, invested some of the money, put some in savings, and bought herself some pretty jewelry and a nice vacation. She subsequently sold the lakeside cabin - having determined it wasn't really her bag - sold her little house - having found the love of her life and moved into his place - and other than throwing herself a whiz bang (and yet modest) wedding, is sitting pretty, feeling safe in her financial situation despite economic woes and possible layoffs.

And the most common tale of all these days - the dreaded job loss. One of my dearest friends has had a spouse put out of work by the economy. Since like most of us, they had little cushion on their month to month, two months after his job loss, they are now raiding their retirement funds to make ends meet. Hopefully this is a short term situation, but at the age of 42, you don't want to be starting back at zero in your retirement planning.

Today I received my 401k statement and noted that I have lost 3 years of "gains" in fund value. While the balance is still a healthy nest egg, it is demoralizing to see that I am running dangerously close to only have my original investment in place and with another serious loss in market I could actually have less than I put in! I called one of the fund advisors to talk about options - should I move my funds into another account? Specifically, should I move them from a variety of funds into one of the retirement data management funds that manages risk based upon your projected year of retirement? Essentially, the answer I got was - it's a crap shoot. Those funds have lost money with the down market too, and while they say they manage your risk, they aren't tightly managed based on market values, just spread across investments that have a certain risk-return ratio. I don't know....perhaps the ostrich head in the sand strategy is the way to go right now.

Hubby's latest scheme (in addition to doing all the right fiscal things, like increasing investment in 401k funds, paying down debt, and no revolving credit) is to chip in with his co-workers and buy an annual LOTTO membership, hoping against hope to be that one in a bazillion who hit the numbers and the entire department resigns at once. After all, you gotta be in it to win it.

What are you doing right now to manage your money? What would you do with a modest windfall? Are you managing a shortfall? Is there any magic bullet? Or are we all just f*cked?

The Trickle Effect

TRICKLE def.
1. to flow or fall by drops, or in a small, gentle stream.
2. to come, go, or pass bit by bit, slowly, or irregularly
3. to cause to trickle.
4. a trickling flow or stream.
5. a small, slow, or irregular quantity of anything coming, going, or proceeding.

Trickle Down became a common term when paired with economics. In reviewing the definition above, I'd have to say I can see why that term came to be. I can certainly say that positive economic booms have had a small, slow, or irregular trend of coming, going, or proceeding in most of our lives.

However, current economic conditions need a new term.

DELUGE def.
1. A great flood.
2. Something that overwhelms as if by a great flood.
3. To overrun with water; inundate.
4. To overwhelm with a large number or amount; swamp.

Yup.

That's the way it feels today.

As I learned of yet another friend who has lost his job, I wonder when the flood will stop? Until then, I'll just keep treading water, and praying that the economy begins to trickle UP soon.

Cha-Ching

We have two cars with 130,000 miles on them. One we really feel we need to retire, the other, we (and our mechanic) feel has life left in it yet. But of course!! just as Hubby and I have been slowly putting money away for our new car purchase, the car we were GOING TO KEEP crapped out.

Last weekend, out of nowhere, a bunch of lights on the dash began to blink in distress. Long and short is: $2700 transmission repair needed. But if we get it done, the car should last another 80-100k miles. After $2700....it had better!

ugh. ugh. ugh.

We were just starting to see the light at end of the tunnel with upcoming holiday bonus time, tax refund time, and our credit cards all back to a zero balance. And - hello! - Christmas shopping time is upon us.

Donations can be made out to WENDERINA'S SUCKY TRANSMISSION SUCKY TIMING SUCKY WORLD CHARITY and sent to P.O. Box 7825 (a.k.a. S.U.C.K.) in Sucktown U.S.A.

Laws of Economics

With all this turmoil on Wall Street right now, I was remembering an editorial I cut out of the Wall Street Journal in June -

Vanishing Act: The Law of Household Economics
For every financial windfall, and equal, unexpected cost;
Tax Rebate = Appliance Repair
by Karen Blumenthal

"...Just as we prepare to get ahead, some undbudgeted expense explodes in front of us and we have to deal with it. The Law of Household Economics isn't so much about rotten luck as it is about the endless challenge of keeping our financial house in order. Staying on top of the budget, keeping the credit cards in check, and building those savings adn retirement accounts takes real discipline and hard work. Windfalls won't get us there. Instead we have to sweat the spending details, worry about investment returns and, in times like these, cut back or even scrimp....I clearly remember our last rebate. We had high hopes for our expected $500. But a week before it arrived, the air conditioning went out. The bill to repair it? $500."

I can't help thinking this same law of economics is coming home to Wall Street.
And those financial wizards never saw it coming.