Back in 1995 I was in in a Target looking for a TV for an apartment I was using in a major US city where I was working for a few months.  I wanted a TV that would be about 21″ (measured diagonally) Before I arrived, the store had marked-down the floor models.  The TVs had fingerprints on the screens, which could easily be cleaned with a squirt of Windex(R).  Some had a few scratches on the case.  I inquired about a 27″ model that had already been unplugged from the cable and electrical connection.  The salesman told me I could return it for a full refund if it did not work.  I asked him if he could provide me with the remote and cord, which were not with the TV.  He called for the manager.  I am not sure what he told the manager, but the manager walked up to me and said, “We can’t take more than 40% off the price on the clearance tag.” Hmm.  Well, that had nothing to do with my question, but OK.

So, there was a $499.00 TV that was marked down to $300.  Now I could check out for $180 and have plenty of money left for the remote.  They found the cord.

The TV became our primary TV in our primary residence.  I figured I would replace it with one of those HDTVs when it blew up, but it never did.  After being the last guy on the planet without a HDTV, except perhaps you, I decided to buy a HDTV for my wife for Mother’s Day.  I searched all the big box stores and scoped out the market.  Then I went to WalMart to see what they had.  The space I had to work with is 41″ horizontally, so I could fit what most manufacturers call a 42″ (measured diagonally) TV.

During my trip to WalMart, I noticed that they had marked down their entire line of Phillips(R) HDTVs.  I could not conclude if they were ending their relationship with Phillips, like they did years ago with Rubbermaid, or if this represented a change in the line, or a model year change.  Nevertheless, the $750.00, 42″  HDTVs that WalMart usually sells for $628.00 were marked down to $498.00.

I told them I would take one.  The clerk went to the back of the store and came back with the “sad-face.” The computer said they had three 42″ Phillips HDTVs, but none were found.  I asked her if she could check other stores in the area, and she said she would.  A store across town showed three also, so she called. Further check indicated only one.

I rushed over to find that the only one was the display model.  A quick inquiry indicated that they could take 30% off for the floor models, that were actually “wall-models.”  I started to have a flashback.  They looked for the remote.  Nothing there either.  Shortly thereafter, I walked out with a 42″ HDTV for $348.00 plus $7.00 for the remote.  Oh, they did not have the stand either.  I was originally planing to mount it on the wall.  The InvestmentBuddy says “Don’t buy the $100 wall mounts bought locally.”  They are the same as the $25 mounts sold online.  Check eBay and Amazon.com.

When you are done, rent Ernest Goes to Camp in High Definition and enjoy.

We will assume for this session that you adhere to the guidelines about personal cleanliness and character.  We will not cover those issues.  They tend to develop well with age. Somewhere buried in her instructions were the following words,

“Don’t blindly follow the crowd.  Just because Johnny does something, doesn’t mean that you have to follow.”

Her simple instructions are very applicable when it comes to savings.  Now this will sound a little harsh, so get a cup of tea and relax.  I mean really relax, and listen to the InvestmentBuddy before you get too excited.  There will be opportunities to spend money on life’s pleasures and thrills that will be appropriate and natural.  Like everything else in life, there are inexpensive options and expensive options.  You will be presented with both.  These “opportunities” often are pitched by family members and are almost never presented as optional.  Evaluate each on it’s merit.  Go along on the ones that make sense.  For the ones that are outrageous, the con goes something like this:

“Dad, Sally and Mary are flying to Boston for Spring Break.  They will be staying with friends there so we won’t have any expenses.  ….  I need $2,500.00.”

“What!?”

“We we have to fly.  Spring Break is only a few days and we will do some shopping, visiting, dining and take in a concert while we are there.  Since Sally’s friends live there they have already planned the trip and were kind enough to include me in the plans.  All I need to do is to buy three or four outfits before I go.  The weather in Boston will be unpredictable next month.  Can I use your gold card this afternoon?”

Trust me, you are about to be accused of being the Anti-Christ.  Every family’s financing is different.  Every financial threshold is different.  But the InvestmentBuddy is speaking to the upper middle income families here.

Big Ben and Double Decker Buses in London

When my children were in college, I was asked (by all three) if they could study in Great Britain. My oldest daughter was naturally the first to ask.   She and five other girls were renting a three bedroom home near campus.  All of the other five girls in her residence had either gone or were scheduled to go to Great Britain.  The university has a well established program with intense study and touring for two weeks.

This trip had been a traditional treat for many of the families involved.  They had sent their older children, and the act of sending the younger children was simply a mechanical routine.  The Money Removal Routine … Open vault.  Remove money.  Send it to the registrar’s office at the university.  A routine they could all easily afford.  That made our decision NOT to send our daughter particularly painful.  Fortunately our family was contemplating a trip to Italy to visit the homeland of my mother’s parents.  What I am about to tell you will not easily be believed.  You will have to check this out for yourself.

Over the next two weeks, I worked with a travel agent to book our airfare and hotel rooms for our family of five for three full weeks for less than it would have cost our one daughter to “study” in Great Britain for two weeks.  Why the difference?

College cost is like health care cost.  Usually somebody else is paying for it.  There is less scrutiny on the nickels and dimes that add up to thousands of dollars.  The other aspect of an all-inclusive tuition/travel/lodging/touring package is that you are not allowed to analyze any of the component costs because they are not broken down into understandable elements.

Leaning Tower of Pisa

Did my children think my wife and I were cruel and made a harsh decision? Yes – for a while.  But I can confidently tell you that the three weeks we spent in Sicily, Rome, the Tuscan Countryside, Sorento, Venice, Florence, Pisa and Milan will always be remembered as the family vacation of a lifetime.

Don’t always follow the crowd.  Sometimes you can find a MUCH better alternative.

Now the old InvestmentBuddy will not just speak in generalities here.  I’ll give you specifics about how you can save thousands of dollars on your daughter’s wedding.  I am writing from experience.  This is real how-to information.

I am the father of two daughters and a son.  The first daughter got married first, as it should be.  We wrestled with the cost of the flowers. We discussed the cost of the cake, how much it costs per slice, how much it costs per person, how unreasonable the total cake cost is, etc.  Discussions about the dress made my head almost explode.  This was before WeddingDressMarket.com. We debated the cost of the catering.  How much food is enough?   How much food is excessive?  We discussed the candles, ribbons, and the ring pillows.  The girls would eventually flee whenever I entered the room.

The mother of the bride (my wife) and my first daughter simply did not want to discuss the details with me.  I, on the other hand, knew that it was ALL ABOUT THE DETAILS.  If you overspend on every item, you will overspend on the entire wedding.  This was certain.

Daughter #1 eventually got married and spent approximately $12,500.  The costs were recorded in Quicken in a specific category.  Unless the girls “rat-holed” money for the wedding for a long period of time and spent it in the time period preceding the wedding, which I don’t think they did, I was reasonably sure we threw a $12,500 wedding.

These weddings were in the South.  Money goes a long way and the guest are usually treated to finger food at the church reception hall, and not to sit-down drinking and dining at the country club.  There is some of that here but that is covered in another post about not following the crowd.

Several years after our first daughter was married, our second daughter got married.  I was quickly reminded of how much “help” I was for Wedding Number 1.  We quickly devised an win-win plan.  At an early age, we started a Uniform Gifts to Minors Act (UGTMA) account for our children.  See UGTMA article.  For our second daughter, we had invested in Johnson Controls (JCI) which had appreciated and paid dividends quite well.  There was approximately $20,000 in the account, a result of contributing initially $30, and ultimately $50 per month (Involuntarily Investing) into this Dividend Reinvestment Plan (DRIP.)

Our second daughter was on a full scholarship at a major university, and other than living expenses and sorority dues (ouch), her college expenses were taken car of through the scholarships and grants.  We paid living expense and sorority costs with our monthly bills, and her college nest egg continued to grow through reinvestment of dividends and appreciation through her college years.

Halfway through her senior year of college, she announced her engagement.  We met briefly to discuss the budget.  I think we would have all preferred to have root canals.  Immediately the thought surfaced to pay our second daughter a lump sum for wedding expenses equal to what our first daughter received a few years earlier.  Everyone liked the idea because I would be out of the details.  I liked the idea, because I would be out of the details.  The wedding vendors such as the photographers and florists liked the idea ….. You get the picture.

None of our children realized that the UGTMA account was fully theirs at age 18.  That is the law in Texas.  They could have asked for it on their 18th birthday and we could not have denied their request.  It was their money.   This is simply a technicality that we never mentioned and they never inquired about.  They knew we were saving it for THEIR future.   Consequently we were able to give our daughter and her new husband enough money for the wedding plus several thousand dollars to help them begin their new life together.  They watched every penny, as if it were their own … because IT WAS their own.

In summary, the InvestmentBuddy wedding budget formula is simple:

1. Determine through experience or research what a reasonable budget for your wedding should be.
2. Cut the check to the bride-to-be.
3. Go away until you have to walk the aisle and give her away.

In the words of an attorney friend of mine, his wife gave him three instructions: Put-up, stand-up and shut-up.

Well, how did the InvestmentBuddy’s plans work out?  Both of our daughters’ weddings were beautiful, Spirit-filled, meaningful and large.  Several hundred guests attended both.  Several years have passed since the last ceremony, yet our family continues to hear that those two weddings were two of the best our town have ever produced.  Final hint from the InvestmentBuddy, it’s not about the money.

My son is in the military.  He has struggled with academics most of his life, achieving high marks in some schools and reaching certain goals and struggling with others.  The military has been very good for him, and he is a great young man.  After a few years fighting for our country, he became an officer.

My wife and I traveled 600 miles to see him be presented with his stripes.  After the ceremony, fly-over and reception, we went to lunch at a famous local establishment.  There he proceeded to tell me the good news.  After struggling for five years to make ends meet, his pay would almost triple.  What?  Yes, he would be making almost three times what he had been making earlier that day.

I congratulated him again.  His mother teared-up, and I brought the conversation back down to a very serious tone.  “Son, I have been wanting to tell you the Secret of Life for several years and now I have the opportunity. You are about to be faced with an incredible desire for your spending to catch-up to your earnings.  It will be SOOOO easy for you to once again spend, invest, blow, etc all of your income.  As soon as you return to the base you should create a budget out of your existing expenditures and add, say 15% so you can enjoy the fruits of your great accomplishments.”

There was not a pause.  There was not a reflection. There was not an immediate acceptance of the value of this advice.  What returned is, “You don’t understand.  There is NO WAY I can live on what I HAD BEEN making! I was living a dirt poor existence.”

Then I reflected … did I approach him too fast?  Should I have approached him differently?  Our relationship is like that of many parents of young teens and adults.  They cannot be easily taught, but once they learn the facts the old fashioned way, through hard knocks, they realize how smart their parents are.  We have had the “rebound conversation” several times on other issues, so I know one day we will revisit the Secret of Life discussion.

Our connection remains strong and positive.  If he “gets-it” soon, his practice of increasing his savings at a young age could have a substantial effect on his retirement date, retirement status and his quality of life in his senior years.  Your paycheck may not ever triple, but the formula should be the same.  Whenever you receive a windfall, whether a one time payment or a salary increase, save most of it. Pull a token $100 and enjoy a good meal and a cheap bottle of wine.  Draw down $100 and go on a day-trip to a surrounding city and see some sights you have been putting off, but return to normal life and save the rest.  You will be amazed at how fast it will grow through compounding.

There are many types of Life Insurance available.  The primary life insurance products are Term Insurance and Whole Life.  Whole Life is also called Universal Life.

The big skyscrapers in major metropolitan areas are primarily owned by insurance companies.  How did they get so smart about investing in real estate.  They didn’t.  They got smart about selling whole life insurance policies.  Premiums are drafted month-after-month.  The premiums are huge.  The value of the life insurance diminishes as time goes on.  Please read that last sentence again.  The value of the insurance goes down?  That is correct!

Whole Life Insurance = Diminishing Coverage

1. The plan was not smart.  See below.
2. The plan was not a buy (purchase) program.  It was a lease program.

Nevertheless, GM convinced thousands of buyers to “trade-in” their existing vehicles to “SmartBuy” themselves into a new vehicle. Some owners knew they were trading equity for the right to lease. Based on the blogs, however, many were not convinced.

Kim Mouse wrote “You can turn in the vehicle before the contract ends without any over-miles fees or termination fee if you buy another GM product. Our payment for the vehicle was the 18th and we turned the vehicle in on the 25th of the month. We were lead to believe we would receive credit for the remaining balance of our payment. No. We basically drove the vehicle one week for the entire month’s payment. GMAC refused to give us any credit. They are the reason we waited. We received the runaround from them on another SmartBuy and financing. Crooks. They stole several hundred dollars worth of car usage from us.”

GM changed the name of the plan from SmartBuy to SmartLease. Now it is only half-wrong. GM recently reported, “Consumer automotive finance retail revenue accounted for $6.5 billion, $6.8 billion and $6.6 billion of our revenue in 2005, 2004 and 2003, respectively.”

$6.6 billion does not sound so large, until you think of it as 6,800 million dollars. Buy your next vehicle with both eyes open. Do your research through a respectable source such as Edmunds.com. Price your car through the CarGeek.com or DealerCarPrices.com. Shop alternatives to financing including through your credit union. Be aware that the credit union guidelines have changed in recent years. You may be able to join that credit union that you have been driving by twice a day for the last few years.

Shop SMART and do BUY, but avoid the SmartBuy plan.

A home or car is a major purchase.  It is necessary to shop wisely.  Spend the time to do the research.  Consider the length of time you plan to own the car, home, or other purchase.  Also, consider how your decision will impact other purchases in the future.  For example, if your are buying insurance, the shopping and comparing may not be done each year.  If you understand that your insurance purchase may be valued at several thousands of dollars, you might spend more time shopping for it than you would a new DVD player.