Will You Define Retirement On Your Own Terms?

defining retirementRetiring on your terms sounds like a good idea, doesn’t it?  After all, you will eventually retire.  Unless you suddenly die while being employed at the time (I know, uplifting thought!), there will be a period of time when you’re done working for good, but still living.

The question is, on whose terms will this retirement of yours actually be?

I’ve been giving this some thought, in light of both my own life and what I hear from others.  The latter also includes what I read on other blogs regarding retirement.  It seems like there are varying approaches to what retirement will look like, and when it will happen in life.  More on that soon.

First, here are two very uncool things that will probably happen to us as we get old:

  1. Physical or cognitive problems will make it difficult or impossible for us to work.  Sure, this may be tough to envision in one’s 20′s or 30′s, and perhaps even in the 40′s and 50′s.  But at some point, the body and/or mind will decline.  It happens.  And, there is a high degree of likelihood that it can happen to most of us.  Yes, even if we’re incredibly fit now.
  2. Ageism.  Employers, in general, seem to favor youth, energy, and speed over age, wisdom, and a slow pace.  I think we all realize this will happen, even if we don’t want to acknowledge it or have never experienced it.  Maybe we have seen it happen to an older family member or someone we know of an older generation.

Given these two factors, how do you want to define your retirement?

Here are a few ways to go about it.

Keep Working Until You No Longer Can Because You Need the Money

In this approach, you keep on working until you run out of options, or your body or mind breaks down.  This basically leaves things in the hands of nature and others, based on the two factors mentioned above.  When you can no longer work, you no longer have income.  Then, you are forced to live on what you have saved, whether or not it’s enough.

I actually respect  people that keep on going as long as they can.  The thing is, do you want it to be on your terms or based on factors you can’t control?

This brings us to another approach….

Keep Working Until You No Longer Can, Because You Simply Enjoy Working

In other words, you work until the end of your useful working life because you want to, not because you need to.  Doesn’t that sound better than the first option?  It requires planning, and a recognition that those two factors above will happen.

There is another approach that works well too:

Keep Working Until You Decide You No Longer Want To, On Your Own Terms

Here, you can choose opt-out of the workforce when you choose to do so.  If you lose the passion, and want to focus your energies on other areas of life outside the realm of your career, you simply do so.   In this case, done right, you might have the option to “retire” in different ways:

  1. Semi-Retired.  Maybe you still like your career and have a passion for it that you don’t want to put aside.  Perhaps you can work part-time
  2. Mostly Retired.  Perhaps you want to simply consult, or work on a few part-time side projects.  Maybe that would be more fulfilling.
  3. Totally Retired.  You check out of the scene entirely, and spend your life on other things that don’t involve working for money.

Making It Happen

I think what it really comes down to is recognizing the reality that we each have an effective useful working life that isn’t eternal, planning for that reality, and then customizing our plan based on what we envision our future to be.  Sure, there are occasionally factors way out of our control that prevent our best plans for succeeding, but careful planning and positively directed time and energy can help us make it happen.  The way we want it to, on our terms!

If we want a simple approach to giving ourselves options, I’d say that increasing these 3 important financial numbers is a good start.

My Questions for You

What retirement path are you presently headed toward, based on your current situation?

What retirement path would you actually prefer take?

What are you doing to make your goal happen?

Online Reviews Can Often Help Save Money and Time

online reviews can help save moneyThere’s nothing like learning from experience.   This can be particularly true when forming an opinion on a certain product or service.   We can choose to spend our money where we believe – based on what we’ve encountered – that we are most likely to get the most value for it.

There may something that could be better than learning from one’s own experience: learning from the experience of others.  

Now, I don’t think that learning from someone else’s experience is necessarily going to be better than learning from your own.  After all, if you’ve bought a product, you would naturally have your own opinion of it.  Who better to know how a product will be for you than yourself!

But it can often be difficult to get first-hand experience to inform every purchase you make.  For example, if you were looking for an appliance, you might have an opinion of a certain brand you’ve used.  But you wouldn’t know about other brands.  After all, how could you have tried them all?  The same concept might apply to a variety of other things such as cell phone providers, debt consolidation loans, and accounting software.

Thus, it’s just not feasible to try everything ourselves when it comes to many products or services.  There is only much time – and money – that we have available. 

That’s where online reviews can come into play.  If you’re going to spend your money, or get help with your money, it couldn’t hurt to have additional information to at least consider.  That additional information can come in the form of online reviews.

Reviews can be a great way to make effective use of our time.  Instead of relying on our own time and resources, we can leverage the experiences of others.  If we can utilize others to provide us with some input, in the form of a review, it could potentially help us make decisions that are more informed.  The best part is that we save those resources and that time I mentioned.

Thinking about it, one might be able to learn from how we utilize reviews for other types of purchases.  Two examples that come to mind are movies and restaurants.

With a movie, the cost these days isn’t all that low if you’re going to the theatre.  Before spending money and time on a new movie that has a compelling trailer, I’ll check out a review.  This is even more important with dining out at unfamiliar, pricey places.  When we’re spending a pretty penny on such a meal, we’re taking a chance if we haven’t been to a place.  By reading online reviews, we’re taking an interest in protecting our money and time.  And, in the case of a few restaurants, maybe even our health.

Anyway, the concept of doing some research and reading reviews is one that should be paid attention to.   Here’s one more example to consider: cars.  Would you buy a car without at least reading some reviews?  Certainly not a waste of time there, so one can consider applying this approach to other situations as well.

The costs of a bad decision could be high.  Potentially mitigating the risk of these types of bad decisions is something that can be beneficial to us in terms of finances and other ways.

What about you?  Do you utilize online reviews to help you make decisions on purchases?  If so, have any proved to save you money or potential hassles?


Selling Stocks In a Bull Market: Interesting Historical Lessons

selling stocks in a bull marketMarkets go up, and they also go down.  Kind of like gravity: if you throw an apple into the air, it will eventually come back down.

Except, that’s not exactly how it goes with markets.  Sure, they do go up and down, but the long-term trend is up.  Even when you consider the impact of inflation on stocks, there’s at least some upward trajectory over time.  When you add in the reality that compounding can be a great benefit, that higher rate of return with stocks is understandably a place that’s appealing to many with long-term time horizons.

So stocks tend to go up over the long-term, and offer rates of return that are pretty good compared to lower risk vehicles.  We know that.  But what about when stocks have been going up for a while? In other words, do stocks get a lot more risky in a bull market?

I thought of this because as of this writing, stocks have reached historical highs here in the U.S.  Naturally, there tend to be a fair number of people who start to get squeamish during protracted bull markets.  In other words, they wonder when the floor will drop from underneath them prices will tumble.

There’s that saying that we should be fearful when others are greedy, and be greedy when others are fearful.  I’m no Oracle from Omaha (far from it!), but maybe we should be careful to avoid being too fearful in bull markets.  Perhaps we can hold onto that greed a little bit.

As I do on occasion here, I pulled and analyzed some historical stock data to figure this out.  In this case, I took historical S&P 500 data for just over 63 years – from January 1950 to November 2013.  Based on this available data, I analyzed the annual yearly change in the market price in the context of bull markets.   Here is what I found:

Finding #1: Stocks tend to follow a strong year with another solid year

How do you define “strong year?”  In this case, I defined it as a year with returns of 20% or more.  Since 1950, there have been 17 such full years.  In the year following a strong bull market year, stocks average a nearly 11% rate of return!

So, if you’re in a year that happens to be very good – where there is a bull market – the following year tends to have strong performance too.  Now, these are averages of course, and there were some subsequent years that were awful.  No streak continues forever!  But some were good, and clearly the average of nearly 11% is very solid

Finding #2: Stocks still don’t automatically fall after a strong 2-year period

So, we talked about one year in the previous finding.  What if we expanded it to 2 strong years?  In this case, we’ll define a strong 2-year period as one with a total increase of 35% over that time frame.  There were 13 such 2-year time periods since 1950.

In the year following 2 years of bull-market performance, stocks average a return of just over 4%.  So, after 2 years of well-above average returns, things tend to come back down to earth.  However, it’s not like a return of around 4% is a total disaster.   There are far worse “safe” alternatives, though it should be pointed out that with stocks there is a range of good and bad years in there.

What are the implications of these 2 findings?  I see this as a lesson to be learned, that just because stocks have gone up quite a bit during the course of 1 or 2 years, it doesn’t mean that they’re ready to start crashing.    Of course, going from 1 strong year to 2 strong years collectively can decrease the odds of subsequent strong returns.  However, clearly there is often longer life to bull markets than might occur to the more risk-averse investor.

As I write this, we are in the midst of a situation that basically fits both of these scenarios above:  1) Annual returns > 20% (YTD through mid-November), and 2) a nearly 2-year return > 35%.

Food for thought, as you consider what type of scenarios might happen next.

My Questions for You

Do you get worried that stocks will fall, after a prolonged bull market?

Do you agree that bull markets have a longer life than one might realize?

What are your current thoughts – positive or worried – about the markets might be headed?

Festival of Frugality #408

festival_of_frugality_pinching_penniesWelcome to this week’s edition of the Festival of Frugality!

If you enjoy frugality, and micromanaging pennies, this collection of articles is for you.   Plenty of good reads below:

Kali presents Twenty Things Twenty-Somethings Should Know About Money | Common Sense Millennial posted at Common Sense Millennial.

Daisy presents Giving When Money is Tight posted at Suburban Finance.

Harry Campbell presents “Annual Enrollment for 2014: My Company’s HSA vs Traditional Plan “ posted at Your PF Pro.

Pauline presents Money Choices: How Millennials Can Make The Right Financial Decisions posted at Reach Financial Independence.

SavingMentor presents 6 Tips For Keeping Better Tabs On Your Money posted at How To Save Money.

Mrs. Accountability presents Who Should Pay For The Date? posted at Out of Debt Again.

JP presents Lost Health Insurance Because of Obamacare: Can I Still Sign Onto My Spouses Plan? posted at My Family Finances.

Bobby presents The True Cost of Commuting and Some Alternatives posted at Making Money Fast and Slow.

Daisy presents A Cup of Coffee: Daily Necessity or Daily Indulgence? posted at Suburban Finance.

SFB presents How to Save Money When Buying Your First Home posted at Simple Finance Blog.

Lindy presents Know How To Spend And Manage A Credit Card Account Responsibly posted at Minting Nickels.

Tushar presents Write Down What You Spend: You’ll Save More posted at Start Investing Money.

Suba presents Should You Learn to Fix Your Own Car? posted at Broke Professionals.

Mr. Frenzy presents Single Cent Problems: The Truth About The Penny posted at Frenzied Finances.

Don presents Ten Tips for Choosing the Best Home Loan posted at MoneySmartGuides.

Jeremy presents Tips to Save Money on Groceries posted at Modest Money.

Kayla presents The Key To Paying Off Credit Card Debt Quickly posted at ReadyForZero Blog.

John presents Buying in Bulk: Making Warehouse Club Shopping Worth the Trip posted at Frugal Rules.

Bryce presents I’m Glad I Live Now posted at Save and Conquer.

Ben presents The Twitter IPO: A Big Disappointment For the Little Guy posted at The Wealth Gospel.

FI Pilgrim presents Flipping The Script: How I Learned To Live On Last Month’s Income posted at FI Journey.

Sustainable PF presents Adopting Minimalist Principles to Save Money and Live Sustainability posted at Sustainable Personal Finance Blog.

Alexa presents How to Pay Off Debt posted at Defeat Our Debt.

Alexa presents How to Make Money Blogging posted at Single Moms Income.

Natalie presents Are We Enabling Bad Behavior? posted at Debt and the Girl.

Barbara Friedberg presents Roadblocks to Saving: Not Planning Ahead posted at Barbara Friedberg Personal Finance.

Holly presents Why is Obamacare Taking Away my HSA? posted at Club Thrifty.

Monica presents 8 Warning SIgns That You’re Living Beyond Your Means | Monica on Money posted at Monica On Money.

Buck Inspire presents Club MomMe’s Family Fall Fest 2013 Recap posted at Buck Inspire.

Marissa presents How to spot a good mortgage broker from a bad one posted at Finance Triggers.

Bob presents Age Old Debate of Whether to Buy or Lease posted at Dwindling Debt.

Andrea presents The Cost of Carrying a Baby: 8 Unexpected Expenses of Motherhood posted at So Over This.

Hadley presents Build or Buy? posted at Epic Finances.

Matt presents The High Cost of Using Cash posted at Budget Snob.

David Leonhardt presents Protein Powder – not just for shakes! posted at The Happy Guy.

Little House presents Three Most Common Causes of Debt posted at Little House in the Valley.

Emily presents Accepting Money for a Favor posted at Evolving Personal Finance.

Lazy Man presents TrueCar Reviewed: We Bought a New Car posted at Lazy Man and Money.

Miss T. presents Avoiding the Need to Upgrade Gadgets posted at Prairie Eco Thrifter.

Dollar presents Free Ways To Make Money Online posted at Easy Extra Dollar.

Justin @ Root of Good presents Join the Military to Retire Early? posted at Root of Good.

Thanks for checking out these articles, and I hope you enjoyed this week’s edition of the Festival of Frugality!

Not Your Standard Monday Office Conversation

monday_office_conversationStandard Monday conversation in the office:

“So, how was your weekend?” asked John.

“Pretty good.  How was yours?” responded Bob.

“Real good” said John.  “Have a good day”.

“You too”, Bob replied.

I can’t tell you how many times I’ve been a part of this ritual.  Often times, it’s just something two people do in order to just say hello, be friendly, or show that they’re team players.  Simply an innocent icebreaker.

That being said,  I’ve found that many other times someone asks this question, it often means they did something pretty interesting.  Or, at least it was something they thought was interesting.  Invariably, it’s something they’re proud of and wanting to share with you for some reason.

Of course, the next step is to get you into dialogue where you share what you did, and then ask them what they did.  Sometimes, with certain people, you know that they want that reaction out of you, to make themselves feel good.

“Wow! Sounds like you had a good time with those tickets on the 50 yard line.”

“Cool! That’s awesome that you and your husband bought a new car.  Great choice.”

“You went to Brazil? For the long weekend, really? Incredible!”

Yes, that last one actually did happen.  Someone once casually told me that he went to Brazil for a long weekend.  He went to see a woman he was dating, and I have to say that his particular story did impress me.

Well, given that this is a personal finance blog, how about doing something a little bit different here.  How about asking “how was your financial weekend“?  For most, this would mean how you did in terms of spending your money.  This is a place where we talking about squirreling away money, after all.

Plus, if you work Monday through Friday, you might have time available to shop or be entertained over the weekend….thus being tempted to spend money.  At least this is the time when I’ve spent a lot in the past.

So, I’ll share my modest personal finance weekend story here.  I’ll be the first to admit, it’s not as cool as flying to South America for a few days.  But as someone who advocates squirreling away money to help grow wealth, this one weekend highlight will have to do.

Here’s our household’s personal finance highlight for the weekend:  dinner, movies, and snacks all for free!

This is how it happened.

Dinner: a gift card that was received some time ago was used to get a pizza.

Movies:  got a few good choices for all ages, making use of the public library to save money on watching moviesParaNorman and The Smurfs for kids, and Argo for the grownups.

Snacks:  each person got a few pieces of Halloween candy, which just made a dent into the excess of sweets obtained courtesy of people in the neighborhood.

How much was saved?  Well, if you went out to eat at a restaurant, and later went to a theatre, I have to think that this would have cost somewhere in the $75 range.  At least, and possibly more.   Rather, in this case, it was all free.  Other than the departure from healthy eating for one evening, but it tasted good :)

I’ve written about inexpensive fall activities before, but this was a zero cost one.  Not a bad way to spend a chilly evening at home!

My Questions for You

At the risk of sounding like the conversation I was mocking, how was your weekend?  Though in this case, I mean: how was your financial weekend?

Do you ever have those weekends where you have a really fun time, and simply don’t spend much at all?

Back to those Monday morning conversations: do you also engage in those often?

Sidestep Workaholism, and You’ll Live More Profitably!

avoid_workaholism nowWork hard, nose to the grindstone, and you’ll get places.  Be a workaholic.  That’s conventional wisdom that has some merit, but can it go too far to the point of workaholism?

I think so.  A nice article on Market Watch delved into the topic of working massive hours, and the tough, machismo aura often associated with those that do that.  Not just hard work, but really hard work can be a perceived hallmark of those who make it big.  Or so the perception is, which the article seemed to brush aside – and I agree!

Don’t get me wrong.  I’m not advocating that most people can realistically expect to work just a few hours a day and live well much less prosper.  That might be a goal or desired state, but it takes work to get there!  This work is often hard work, and as a part of that we can say that there is an association between being persistent and making money.   If you really want something, being smart and strategic and truly working for it can go a long way to helping you reach stretch goals.

That being said, what’s so great about working incredibly long hours in order to make that happen?  I’ve written about how it can be really unhealthy to work long hours.  I’ve done it before, and who knows – I might have to do it again for short time periods.  But I know that it isn’t a long-term, sustainable thing to do.

Now, when right out of college, I can see how it might be okay.  Put in some really long hours of work when you don’t have bigger responsibilities like a family, but you do have the very high level of energy that you won’t have later in life.

From my own experience, there have been times where I worked really long hours and was even known for it.  I was practically known as “Mr. Late Night” at one job, where I’d be totally willing to stay beyond the time others would – often until 10pm or later – to get projects done.  This despite coming in at 8:30am.  Keep in mind this happened quite a few times, including many later than midnight.

It probably helped me at the time, but it’s not sustainable and I don’t do that anymore.  There were other people that achieved similar progression at work, and they didn’t necessarily work those hours.  So why should I?

Beyond that, life is about balance.  There’s so much more to it than a single-minded focus on career and income.  One my original posts was about the role money has in our lives, and I go back to it when I feel like I need more balance with what’s truly important: health and relationships.

The thing is, if we do have balance, we might actually do better in our work.  I don’t know about you, but I can be much more productive on work or other projects after I’ve had a chance to disengage for even a short while, and completely think of other things.  Constantly checking email on your phone to see what’s happening at work is like an addiction.  Thankfully, I don’t do that.

Also, aren’t you more productive when you get a full night of sleep?  I’m convinced that there is a correlation between sleep and wealth, and that being properly rested can give us more energy to succeed at our work.  When I hear or read people talk about staying up super late and getting just a few hours of sleep on a frequent basis, I just think that it can’t be good.   The great thing is that by working less and taking care of oneself though sleep and balance, we can actually do more!

I say all this knowing that I can get obsessed with work or other projects too.  Still do.  Once it reaches 9:30-10:00pm, I get this wave of energy and focus where I can concentrate for hours.  The thing is, I try to stop myself most of the time now.  Just getting more done within reasonable time frame by following tips on how to be more productive (especially those that I write about) seems to better for overall balance and fun!

My Questions for You

Do you go along with the notion that being a workaholic has major downsides, or do you just push the pedal to the metal and drive toward your goals?

What do you think of the notion that we genuinely need balance, and can actually get better results anyway by embracing it?


Addicted to New Phones: How Often Do You Upgrade?

There always seems to be a lot of buzz around the release of a new iPhone.  It’s like Christmas for some grownups, many of whom will mark the date on the calendar and plan their life around the phone release for that point in time.  Clearly, with people lining up outside stores, there is an almost a cult-like following for them.  The record sales over the last weekend, as reported by various outlets, shows that this latest iPhone is no exception.

I know “cult-like” might seem like a strong way to put it, but that’s really what its seems like.  This isn’t just a product, it’s a brand like a mega-popular sports team.  And, the craze for a phone release is like the excitement for championship game tickets for a team with title-starved fans.  You would think that people were lining up for Cubs World Series tickets! You know, the team that hasn’t made it to the fall classic since 1945, where making it that far is just about like a once in a lifetime event.  This is my local analogy to describe how people view the release of an iPhone, which is easy for me to make as I like the White Sox, a local rival of the Cubs :)

Anyway, back to phone upgrades.  It’s really a no-brainer for many people to upgrade their phones as soon as their contract is up.  Assuming a 2-year contract no matter what the phone – iPhone or other – most people I know will get a new phone right after that 2 year point is reached.  Maybe they’ll wait a few days, perhaps a month.  But getting a new phone is just going to happen, period.  People are excited to get a new phone, and can’t imagine waiting.  If it’s an iPhone, they’ll take time off work and wait in line.

Some people don’t even wait 2 years!

What about waiting for a while to get a new upgrade?  I’m not talking about a few weeks, or even a few months after the 2-year period is up.  I mean spacing out the upgrades to once every 3 years?

Let’s say you spend $200 for your phone when you upgrade.  This means, over a 6 year time period, upgrading every 2 years would result in a total cost of $600.

If you extend the holding period of a phone to 3 years, you would be spending only $400 over that time.  Thus, you save $200 over 6 years.

Now, it may not seem like much.  But $200 isn’t a small amount of money.  Plus, if you invest that $200, it could be worth a lot more later in life.  That $200 invested with a 10% annual rate of return could result in nearly $3,500 after 30 years.  That seems like a bit more, right?

Further, taking this approach, you’re not exactly missing out on new technology.  I mean, you’re still using the most current phone for part of the time – and a very functional phone for part of the time. I’ve been using a Droid X for the last 3.5 years, and it’s worked fine for me.  When I bought it, it was the newest Android smartphone out there!

That said, it’s probably time to upgrade, especially since the battery life is non-existent at this point.  Plus, my own father has a newer phone than me and even suggested that I get a new one.  Dad having more current technology than me is reason enough for me to take notice.  So, I’m in the market for a new phone. 

But I can tell you that by keeping my current smartphone 1.5 years beyond the end of the contract, it hasn’t hurt my quality of life and may have put a few extra dollars in my pocket. 

Or, maybe there is something magical I’m missing out on, as evidenced by the hordes of people clamoring to upgrade :)

My Questions for You

How often do you upgrade your phone?

Do you think it’s truly necessary to upgrade every 2 years, or do you have no problem with waiting longer?

Finally, I’m curious – if you’re an iPhone user, did you upgrade right away?


Thursday Roundup – It’s Almost Fall Edition

It’s almost fall, as we’re already in mid-September!  Sure hasn’t felt like the seasons are anywhere close to changing, at least around here anyway.  Locally in the Chicago area, the temps got as high as 96 degrees this week, accompanied by the requisite high humidity.  Felt like a muggy, swampy late June week here for a few days this week.

Honestly, I’m not complaining, since in a matter of a few months thermometer readings will nosedive and snow will be a regular part of the mix.  I’ll take the warm weather, and not complain about it.  Especially since by January, many people in cold weather locales (like here) get stir crazy and plan expensive trips to warm weather places.  Go figure :)

In between now and then is the great season called fall - or autumn, if you prefer.  We do get four seasons around here, and fall is one I personally enjoy.  The weather gets crisp and leaves change colors.  Football is here to entertain on weekends, and so is fantasy football.  It’s back to school for kids, and there are all kinds of school activities/conferences (I actually really enjoy those). 

As I’ve written about before, there are some fun fall traditions we like to enjoy – one of which is apple picking!  There’s just something about going out to an apple orchard and celebrating the season on a cool day, picking apples.  If you live in the city or suburbs, it can be good once in a while to actually go out to the country and pick your food from the source.  Within the next week or two, hopefully we’ll be kicking off fall by doing just that.

How about you? Do you have any fall traditions that you’ll be partaking in the upcoming season?

Favorites From Around the Blogosphere

Here are some recent posts from a few personal finance blogs I follow.  Good reads!

The Costco $10 Rule and Other Bulk Buying Tips at Money Beagle

Graduate Debt Free at Free Money Minute

How Amazing is Your Fabulous Life? Understanding What Is FOMO at Financial Samurai

Our 2013 Cruise – A Little More Sedate than Expected at Budgeting in the Stuff

Don’t be a Part-Time Lover of Frugality at Frugal Confessions

Backup Your Data! at The Amateur Financier

Installment Loan Money Trap at My Money Counselor

What’s the Ideal Savings Rate for Retirement or Financial Independence at DQYDJ

Biting Your Tongue When Someone Makes a Bad Financial Decision

First off, the saying “bite your tongue” has always been one that I found kind of funny.  Instead of saying something that could offend someone, you just use better judgment and don’t say it.   So, watching what you say is described as biting your tongue.  Ouch!  But, I guess that pain might be less than what could ensue if you express your thoughts in some cases.

I had one of these situations recently when I was getting my haircut.  As I’ve mentioned before, I’m not one to budget an exorbitant amount of money to spend on a haircut.  I’ll generally go to a national chain location, where I find their work to be good.  There are a couple of places I would go to locally, the specific choice each time dependent on where I’m at and what my schedule is like.

Anyway, I walked in to one of those places, and after a short wait I was seated for a haircut.  The lady cutting my hair was someone I had not seen before, clearly new.  That was fine with me, as I had no real preference, so the haircut got started.

Now, I’m totally fine talking with the person cutting my hair.  It helps pass the time and sometimes mindless small talk can be a fun distraction.  And this lady sure liked the small talk, as she was a real chatterbox.  Telling me about her day, and all that good stuff.

Then, she dropped the comb she was using.  She apologized, and grabbed another clean one.  Then, said “at least it wasn’t my scissors!”.

Being money-minded (big surprise, right?) my immediate comment was “yeah, those are little more expensive.”  To which she replied, “oh, you have NO idea!  How much do you think they are?”

I guessed $100.  Well, I guessed wrong.  Very wrong.

“They cost $1,200!” she said.

Who knew?  I sure didn’t.  That seemed really expensive to me, but I’m not in tune with the hair care business.  And oh by the way, she also had another pair of scissors that she said were $600.  All of these expenses are apparently incurred by the hair stylist, which makes it sound like a relatively expensive business for someone to get into.

Beyond that, I’m guessing that they have to work very hard for the money they get.  For example, I was there maybe 30 minutes for a $15 haircut.  With a 20% tip, that’s $3. With back to back cuts, that’s only $6 in tips on top of whatever they might otherwise be paid.  It seems like a tough deal for them, really.

Then, after we continued with small talk and my haircut, she dropped a bombshell on me: she got a brand new car!  She could barely contain her excitement about it, and I’m guessing most clients had been hearing the same general story.  Good for her, I thought!  But then, being money-minded, I thought “oh, no….how does one buy a new car on this type of income?”

Well, apparently it was a brand new SUV she bought.  How in the world could she have afforded that?  Granted, I don’t know much about her financial situation – actually nothing other than what she does for a living.  Plus, it’s important to be careful not to judge a book by its cover.  But still, it didn’t add up to me.

Then came bombshell #2: she told me that she planned to enjoy it for a long time because she’s paying for it for the next 6 years!  That’s right, a 6-year car loan!  I suppose a 72-month loan is better than a 96-month car loan, but it’s still way past my comfort level.

She seemed oblivious to the type of move that she made.  Burdening herself with debt, on a very modest income, in order to have a cool new vehicle to ride around in.  Why not just drive a serviceable used vehicle, and pay cash for a car or just take out a short-term loan?  It seemed like she was focusing on wants first, not needs.

This is where biting my tongue came into play.  My instinct was to somehow start a discussion of personal finance, to make sure that this person changes her way of thinking to become more responsible.  For her own good, I almost wanted to “rescue” her and have her be able to logically understand what constitutes a bad financial decision.  Clearly, she needed a personal finance intervention!

However, I then realized that this person had those aforementioned $1,200 pair of scissors in her hands, while I was seated with my back to her.  Probably not the best time to get somebody riled up!  Just like when I heard a waitress talk about spending a lot of money on eyelashes, I had to curb the comments for my own good :)

Sometimes, we have to pick our spots when it comes to giving advice.  Even if we feel we are right, and simply mean well!

My Questions for You

Have you ever heard someone talk about a purchase or investment, and find yourself thinking something along the lines of “wow, what a bad decision”?

What would you do in such a situation: bring it up and risk offending the person, or just let it go and let the person figure it out for herself?