Lazy Man and Money

NFL Players’ Money with the Upcoming Labor Stoppage

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At midnight tonight, the NFL owners and the NFL players will no longer have a collective bargaining agreement… unless there is some drastic, last minute progress. This means players will not be paid, this NFL season may be in jeopardy of being canceled or shortened which means owners won’t collect money from ticket sales. There are a lot of reasons why both sides haven’t been able to reach an agreement, but that’s outside of the scope of this blog. Let’s just call it your average strike situation.

Let’s amend that, it’s not the average strike situation. The players make on average a million a year and owners who make dozens millions (my non-scientific estimate). The average American probably has no sympathy for these guys. I can’t imagine what the guy in Detroit who lost his job at the plant is thinking now. He’s had enough labor issues to deal with in his life, he just wants to sit back and finally, for the first time in a dozen years, watch his Lions be competitive on a football field (as they look to be fielding their best team in years). If there’s anyone with no sympathy for these guys its that guy.

On the other hand, I feel for the players a bit. The average football career is short. I think I read it was 4 years, but don’t quote me on that. Not only that, but being a football player is competitive. There are 53 roster spots (not counting the practice squad) and 32 teams. That means that roughly 1700 players are employed at any given time. We read about the Tom Bradys of the world quite often – hey he’s got the supermodel wife, those Super Bowl rings, and model good looks. We don’t hear about players like Rob Ninkovich, the journeyman outside linebacker for the Patriots. For them a work stoppage is a pretty big lifestyle change. Remember that most of these people are in their mid-20’s and this is their first experience earning a full-time salary (albeit a high full-time salary).

With that in mind, I noticed an article from Mike Reiss, one of the best beat writers for ESPN Boston with some sound bites from players about the stoppage:

“Health care, I finally found out how expensive it is, especially when you have a family.” – Linebacker Jerod Mayo

“I’m kind of a cheap guy. I have a lot of money saved up. I don’t really spend anything. Me personally, I’ve been in situations where I might not have even played football, because of the situation I was in [as a player trying to prove himself]. So I’ve always made sure that I take care of my things and make sure everything was set up to where [it needed to be] if there wasn’t football.” – The aforementioned Rob Ninkovich

“[Since] my rookie year, I’ve been preparing for it financially. When I was young, I saved every penny I had to get what I wanted. It’s no different now that I’m 29. I’m fine with whatever happens.” – Leigh Bodden

The interesting thing to me from this extremely sample size is that the players who had all the odds against them seemed to specifically mention their saving habits. Rob Ninkovich has been cut by New Orleans Saints twice and the Miami Dolphins once since being drafted in 2006. He’s on his fourth team in 5 seasons. Leigh Bodden wasn’t one of the drafted players in 2003. The number of undrafted players with lasting careers is extremely small. In contrast there’s a player like Jerod Mayo. He was signed to five-year, $18.9 million deal, which should set him up for life unless he’s spends it all away. He didn’t mention his saving habits at all. At least he made mention of the cost of the health care. It sounds like he’s being woken up to what the average American deals with… and I think that’s a good thing for him down the road.

While on the topic of health care costs, previously Mike Reiss wrote that a Patriots player (who is to remain anonymous) was actually delaying adding some family planning because he wasn’t sure he’d have health insurance. I hope he got the advice to look into Cobra Health Insurance, because I’m pretty sure he’d qualify.

It’s times like this that I’m glad that NFL players like Wes Welker knows his personal finance. Let’s hope that NFL players take this a learning opportunity and switch over from their NFL Playbooks to a good personal finance book.

Build Your Financial Home Brick By Boring Brick

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Recently I’ve been rocking out to a new song by the band Paramore. If you haven’t heard of them, well they’d probably say that ignorance is your new best friend. In fact, I’ve been rocking to them so much lately that lead singer Hayley Williams has replaced Taylor Swift in the category of Inappropriately Young Female Singer that Lazy Man is Crushing On. Getting back to the subject, the song that really got my attention is Brick by Boring Brick. If they given a vote I’d say it is the best song in at least 3 years, maybe 5. To my surprise, when I looked into the lyrics a little deeper a hidden financial lesson came to the surface.

Did you catch it? Some of the lyrics are little hard to catch. Here are a few that I popped out when I first heard the song:

“She lives in the fairy tale somewhere too far for us to find”
“Keep your feet on the ground when your head’s in the clouds”
“Her prince finally came to save her and the rest you can figure out but it was a trick and the clock struck 12”
“Well make sure to build your home brick by boring brick or the wolf’s gonna blow it down”
“Ba da ba ba da da ba da…”

What kind of financial lessons can we take away from this? As Hayley Williams says:

“‘Stop living in a fake fairytale… like, WAKE UP!’ When thinking how I could really get that across in the song I decided I’d use a house. Someone’s safe place, even in a fairy tale – you can’t forge a refuge out of magic & fairy dust. You gotta build it just as real and as solid as a stupid old brick.”

So financially speaking, give up the lottery tickets and pour some money into your 401k. Don’t pay for real estate seminars or get rich quick schemes and max out that Roth IRA. Don’t buy MonaVie or sell MonaVie and build up that emergency fund. When the wolf comes to blow your financial house down, you’ll be glad you built it brick by boring, stupid old brick.

Do you know someone who has their financial head too far in the clouds? If you do (sing along with me):

Go get your shovel
And we’ll dig a deep hole
To bury the castle, bury the castle

I’ve got the full lyrics for you after the jump…

[Read more…]

Saving for College – An Exercise in Depression

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My friend from Rich Credit Debt Loan asked me a simple, but thought-provoking question last week. I’m probably going to tease you with the actual question for a little while. We decided the best answer for the question was to create a calculator and I haven’t had the time to do such a thing. However, the question centered around his plan to save enough money to put his children through college.

In order to answer any question like that, you have to start by gathering information. “How much would tuition be now?” was a key question we had to answer. Often, you can’t know where things are going if you don’t know where they start. Then we looked to how long he had to save for his children. Then we tried to model how his investments would perform over that span. Lastly we searched the web to see how much college costs are likely to go up while his kids grew. The sobering fact hit us over the head… hard. We found a few sites that estimated costs to go up between 6 and 9%… which was exactly what we estimated as the growth on his investments. In other words, compound interest isn’t likely to help him save for college.

There’s some debate about whether putting a child through college a parent’s responsibility. No matter which side you are on with that debate, I found it refreshing to see someone plan their finances far in advance. It makes me wonder what those who aren’t thinking 10 to 15 years ahead are going to do when college comes around. I know there are always loans and scholarships, but wouldn’t it be nice to not have to think about that?

I wish Rich Credit Debt Loan some luck on whatever path he chooses. It looks like he’s going to need it.

Who Else Wants To Join Dream Routine?

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[Editor’s Note: Today’s guest post is from Andrew Kuo, the founder of Dream Routine. He’s put together a financial program that aims to motivate you to get into good financial condition. In that sense, it’s not too far from this week’s earlier post, Get Paid for Getting in Shape. I haven’t had a chance to review Dream Routine yet, but I am intrigued by the concept when he was explaining it to me.]

Many of you will find that this applies to you. Listen carefully because it may change your life. Dream Routine is not a quick fix, but rather it drills down to the core of your money problems to solve them the right way. I’m talking about completely getting rid of your debt and applying fundamental money principles by clearing away all the crap and finding and solving what’s really stopping you from managing your money correctly.

Instead of trying to convince you, in the next 7 days, I will show you several concepts from Dream Routine that will completely change the way you approach your money problems. On the 7th day, you will get a rare chance to join Dream Routine for free. So why don’t we get started immediately? Watch the video below to learn how to motivate yourself the right way to take maximum action and get optimum results.

Managing money is a complex candle problem. Every single one of us has our own unique problems to money management. There is not one universal answer to all our problems, and hence we all are trying to solve our very own complex candle problem. What we have learned from the video is that we must motivate ourselves through autonomy, mastery, and purpose in order to get the best results. Don’t manage your money so you can buy that fancy car, or so you can go on that cruise. You may be harming yourself by doing so. Instead, do it for yourself; make it a challenge so that one day you can live your dreams in harmony!

Visit Dream Routine for more great concepts and principles.

Single Point of Failure Financial Plans

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[Note: This is a guest post by Shadox who writes the blog Money and Such. Money and Such is a blog about personal finance, career, career development, economics and general life commentary.]

Many people live at the edge of financial disaster. In most cases these people don’t realize the precarious nature of the financial situation in which they are placing themselves and their families. They believe that they are being responsible and living within their means, when in fact, they are building a house of cards which will collapse at the first sign of trouble. Their financial strategy is not a robust one, since they rely on the assumption that everything will continue to go well. These are single point of failure financial plans: all it takes to disrupt them is a single unexpected incident.

I have been doing a lot of thinking about this issue as part of our ongoing hunt for a new house. I see many people around me who make less money than I do, and are capable of making much smaller down payments, yet go for bigger, more expensive houses than I would ever consider. In many cases their plan appears sound: maybe both spouses are working and can easily make the house payments; maybe they think that the house is a good investment and will appreciate in value; maybe they expect their income to grow. The plan may currently be viable, however is the plan robust? That is, how much disruption can the plan take before it falls apart? Is there a single cog that can bring down the whole financial machine when it breaks? Is there a single point of failure?

In the case of our proposed house purchase I ask myself the following questions: will we be able to make our payments if I lose my job? Will we be able to make our payments for an extended period if my wife is unable to find a well paying job? Will this plan still be viable if a member of the family gets seriously ill or injured (God forbid)? The point is this: you never know what tomorrow will bring, and while a bigger yard and an extra bedroom is nice, having financial peace of mind is much, much nicer.

Robustness, i.e. resiliency in the face of adversity should be a primary goal of any financial plan. To make your plan resilient you need to take three steps: identify the risks; eliminate all risks that can be economically removed and mitigate others; and finally, plan for how you will deal with unmitigated risk. A plan is only sound if after you have taken these three steps you are capable of withstanding the remaining risk or are willing to live with the consequences. Let’s briefly look at these three steps:

Identify the Risks – naturally, you can’t identify ALL the risks and even if you can, there is not much point in doing so. Some risks are very remote, and others you can do very little about, but at the very least, make sure that you understand the major components of the risks that can disrupt your plan. In the case of buying a house, loss of income is a big potential risk; loss of the house due to a natural disaster is another; and so forth. Once you think you understand the big things that can go wrong, move to the next step:

Eliminate & Mitigate Risks – some risks can be largely eliminated through the miracle of insurance. For example, since we live in earthquake country, I would not consider buying a house without also buying earthquake insurance. The risk of losing the house to an earthquake, without having the financial resources to rebuild is simply unacceptable to me. Yet, the number of people who live in California and choose not to insure their houses against earthquakes is astounding…

In some cases it is possible to simply avoid the risk altogether. Moving to another state to buy a house might not be feasible, but making sure that the house you are buying is located on higher ground such that it doesn’t get washed away in a flood may be possible.

Plan for the Remaining Risks – it is impossible to eliminate all risk. I would love to insure myself against loss of my job, but unfortunately such insurance does not exist. Making sure that I don’t come down with some serious health condition is likewise not within my reach. There are many other similar examples. The point is that if you cannot eliminate the risk, you must plan for it.

For example, I can’t make sure that I won’t lose my job, but I can make sure that we will only buy a house if we can continue to pay the mortgage for a considerable period even if I am unemployed. The plan must be robust to at least one or two major disruptions. Hence, under our financial plan we carry health insurance (robustness in the event of a major illness), we make sure that we can support ourselves on a single income (resiliency in the case of unemployment), we have sufficient, safe and liquid assets that we can tap into if all else fails (a fall back in unforeseen circumstances) and so forth. You get the picture.

Accidents, disasters and unforeseen events will happen. The question is: is your financial plan robust enough to withstand them or are you running a plan that has a single point of failure.