Use it or Lose it: Flex Spending

1. If you have a medical flexible spending account through your employer, check the balance and use it up before the ball drops on 2010 (or by the end of your company’s grace period).

Schedule appointments and/or purchase necessary medical items before the year ends, since you will lose any unused funds. Funds set aside in Flex Spending accounts are pre-tax dollars, so maximize this benefit by spending all set-aside funds.

While you are at it, assess your family’s upcoming medical needs and determine whether your Flex Spending level for 2011 should remain the same or be adjusted up or down. Make the necessary changes at your company’s next open enrollment window.

Here’s a look at other upcoming flexible spending account changes in 2011.

Give a Gift

2. The holidays are a great time to make a charitable cash donation to a cause of your choosing. Donors must be able to produce a receipt or bank/credit card statement for each donation. For cash gifts over $250 donors must have a receipt or written acknowledgment from the qualified organization.

A great way to kill two birds with one stone is to make a charitable contribution in someone else’s name. Most charitable organizations have holiday programs that allow you to make a donation as a gift.

Making a donation to a worthy cause on behalf of someone else is an ideal way to avoid the excess materialism associated with the holidays. A charitable donation can be a wonderful gift for children or parents alike, providing a great lesson for young and old.

Save for the Future

3. Open or contribute to an individual retirement account, such as an IRA, SEP-IRA, Roth 401(k), or Roth-IRA.

Making a year-end contribution to your personal retirement account is, in most cases, a direct way to lower your taxable income. If you are under 50, you can contribute up to $5,000 to a traditional or Roth IRA. The limit is $6,000 for taxpayers over 50. SEP IRA contribution levels are tied to your self-employment income.

Although a Roth IRA contribution does not reduce your Adjusted Gross Income like a traditional IRA, they are an excellent financial vehicle for those who do not plan on taking disbursements from their individual retirement account.

Roth IRA conversions are up sharply this year, since income limits have just been eliminated. If you can manage, make the maximum contribution to your retirement account allowed by law. The immediate tax savings (excluding Roth funds), plus the long-term financial boon, make this move a win-win.

Not sure which retirement plan is right for you? Check out the following comparisons of self-employed retirement plans and other retirement savings accounts.

Whittle Away at the Estate

4. Older investors should consider making a cash gift to children or grandchildren in order to lower their overall estate value.

The goal is to gradually reduce the value of your estate so that at the time of death, estate taxes are reduced or eliminated. Cash gifts of up to $13,000 per recipient ($26,000 if you give as a couple) are permitted annually without requiring a gift tax return. Better that your assets should go directly to your loved ones rather than into the coffers of the IRS.

For the very wealthy, there might be a major loophole in the 2010 tax code: specifically the Generation Skipping Transfer (GST) Tax rates for 2010. Generally speaking, a GST allows a taxpayer to pass assets to grandchildren, or much younger non-relatives. The tax rate, which was 45% in 2009, and predicted to go to 55% in 2011, has lapsed for 2010—meaning 0% GST tax on these gifts. Congress was scrambling to rectify this loophole, but for now, it is still on the books.

Time is Money!

5. I am always amazed at how many people will let the year come to a close with unused vacation days still available to them.

Sometimes if you don’t have holiday travel plans, and don’t have anything special to do, it might seem easier just to head to the office-well think again! Your time is money.

There are many productive ways you can use your hard-earned vacation time. You can work on your side hustle (if you have one), work a seasonal job, make and freeze homemade dinners to save on food bills, sell stuff on eBay or at a garage sale, or tackle a home improvement project.

Letting accrued vacation expire is like giving money back to your boss. Turn your extra vacation days into a financial positive instead of letting them go to waste. Even if you do nothing productive, catching up on rest and recharging your batteries will make you more productive in the new year.

Out in the personal finance world, there is a ton of great information about how to get out of debt, improve our credit score range and make smarter investments. The list goes on and on.

But there’s entire subject matter that we don’t talk much about; what to do about cleaning up our past. I’m not talking about cleaning up credit card debt or student loans. I’m talking about cleaning up the damage we did to others and ourselves by prior acts.

I’m talking about times we weren’t as honest as we’d like to have been. We fudged. We didn’t return equipment. We “forgot” about small (or large) loans.  Or times we didn’t follow through.  We got lazy and fell for some debt relief scam and cost the family this year’s vacation.

I get why nobody wants to talk about it. It’s shameful. But you know as well as I do, we carry that shame. It doesn’t disappear. It never will if we simply ignore it.

And make no mistake. The cost of shame is high. It colors everything we do and every financial decision we make.   From the jobs we take to the kinds of investments we make. And the worst of it is, we walk around in this world without being proud of who we are.

So how do you clean it up?

1. Stop the excuses.

You’ve been telling yourself that what you did wasn’t so bad (and maybe it wasn’t but that has nothing to do with it). Or your inner voice tells you the other person has done worse things. You’ve been very imaginative with the stories you’ve been telling yourself.

Just stop.

The purpose of this exercise is to let yourself off the hook. To forgive yourself.  You can only do that once you are honest about your past.  To stop being ashamed of some past behavior, stop the excuses and own up to the truth about your past.

2. Write yourself up.

Start a list of all the financial acts you’ve done that you’re not proud of. EVERYTHING. What did you do? Who got hurt? How did they get hurt? How much did it cost them? How might they have felt?  If you spent too much and now you don’t know how to generate enough income during retirement, how does that impact your spouse and your kids?

Be thorough and take your list to someone you trust. Maybe your Pastor or Rabbi. Maybe a good friend or even your mother. Select someone you trust and someone you know loves you unconditionally. Tell them about the list and ask for some time to go over it with you.

Once you read the list to the person you’ve selected, you’ll already notice that a huge burden has been lifted from your shoulders. That’s great…but you’re not done.

3. Action.

It’s time to approach the person and make amends. This can be tricky. You don’t want to do this if by doing so, you injure the other person (or someone else) further. That’s something to talk about with the person you selected to go over the list with. Before you take action, think about the best kind of amends to make. Think about the fallout of what you’re about to do as well.

Let’s say you and your co-worker each took something from the back of the store years ago. You are willing to own up to it and accept the consequences but if you do so, your co-worker might get fired too. What should you do?

This is something you need to think through…and seek council on before you do anything.

For those people you can approach, tell them what you did, how much it cost them and how it must have made them feel. Then listen.

Some people will be gracious and will appreciate your honesty. Others won’t be so nice. They’ll tell you they can’t believe you did what you did. You might feel terrible at first but later on, you’ll be glad you owned up.

You can’t control how others are going to react to your admissions. You’re trying to clean house and if by doing so you get bumped up, so be it.

This is a painful process but well worth it.  Several years ago, I went through this.  Just thinking about calling certain people made me break out in a sweat.  And I’ll be the first to admit that a few of the people I called weren’t gracious at all. They told me they were angry and disappointed.  They had that right.

But even with that negative feedback, I got it done and made the amends.  I felt 20 pounds lighter and 10 years younger.  And even the calls that didn’t go so well went much better than I had imagined.

Have you gone through a process like this?  What was it like?  What was the result?

Photo by auntjojo

In the article, Poundstone makes the point,

“When you have to estimate the value of something, you use a mental process called anchoring: You decide what’s fair based on what you know.”

That’s exactly what most of us do when we march into stores to pick up a particular item, like a new portable air compressor (a recent item I decided to pick up to inflate tires at home and on the road). In my head, I had an idea of how much a portable air compressor should cost – somewhere in the $30-$50 range. My estimate was loosely based on similarly-sized gadgets I’ve seen, and bought, in home improvement stores, such as mini shop-vacs, cordless tools, etc.

I also took some time to scout around online to determine which model and features I was interested in, and to get an average price from online retailers. Since I was buying the air compressor just before an upcoming trip, purchasing online wasn’t really an option, unless the cost savings were significant enough that I could still pay for expedited shipping and come out ahead (not likely).

Back to my trip to the home improvement big box store. Armed with my Amazon.com print out reflecting the model and price of the Black and Decker Air Station (a safe choice in my price range), I went straight to the hardware area and located the item. It was $39.99, just a dollar more expensive than the online price. After sales tax, the final price was comparable to what I would have paid with online shipping, so I was happy to just buy it in the store and have it for our upcoming trip.

Beware of the 10/$10 Deals

Unfortunately, not all purchasing decisions are created equal. Neither are store sales and signage. Our local Kroger frequently runs 1o-for-$10 deals on particular items throughout the store. In theory, these are great deals. However, they have a way of skewing that anchor Poundstone refers to. Shoppers automatically want to buy more of the item simply because it is marked 10/$10.

I’ve even caught myself falling for this trap with things like spaghetti noodles, condiments, and other 10/$10 goodies Kroger often puts on “sale.” Normally, their store brand ketchup runs between $1.29 and $1.39. We pick one up every couple months when we open the backup from the pantry.

But when those babies go on the 10/$10 deal I feel compelled to clear the store shelves. After all, five bottles of ketchup at $0.29 off is over a dollar in savings! Recognizing I don’t have to buy more than one item doesn’t seem to help either. The 10/$10 offer often compels us to buy more than we would if they were simply price $1.00 each, just as Poundstone mentions in the article.

My shopping trip invariably winds up with me returning home and asking, “What the heck am I going to do with five bottles of ketchup?” Stockpiling is a good idea, but there is only so much room to store this stuff.

A more recent example involves Kroger’s “Buy 8, Get $4.00 Off” promotional. I don’t mean to pick on Kroger; we actually like the store and do nearly all our shopping there. During this promotion various items around the store are tagged with a special sticker. If you buy eight of them, you get $4.00 off of your bill instantly. What a deal! That’s a family-size bag of Doritos!

So what do we do? We run all over the store buying things we don’t need to get up to that magic number of eight “specially marked items.”

How to Avoid Overpaying

When you enter the store, it’s a good idea to take along both a physical list and a mental list. The physical list is an easy one – it’s a list of items you need for meals and snacks over the next week or two. But the mental list is where you’ve anchored some idea of how much these things cost, and how many items you really need.

Armed with both lists, you’ll be able to resist the temptation to pay more, or buy more quantity, than you were willing to before entering the store. And no store promotion can move that anchor.

What other strategies do you use to avoid paying more? Do any of you keep a price book to track the cost of items over time, or from different stores?

*This article appeared in the Carnival of Money Stories: Final Four Edition

Photo by Stu Seeger

There are No Cinderellas

I would argue that there is no such thing as a Cinderella team. The label is frequently used to slight their accomplishments by insinuating “they got lucky.” Sometimes luck plays a part in it, but most Cinderellas pull off the upset because they out-worked, out-hustled, out-coached, and out-played their opponent. The pinnacle moment in their sports careers comes as a result of hours of preparation, workouts, practice, and film study.

How does this apply to finances? Many of the wealthiest people in our country are also some of the most envied. Sure, we all would like to be Bill Gates for a day, but why do so many people speak ill of successful people like Gates? Is it jealousy? Or is it the realization that they don’t have the fortitude, the work ethic, the determination to be as successful as those in the wealthy class.

“Well it is easy to build wealth if you receive an inheritance.” Believe it or not, most millionaires are self-made, first-generation rich. They do not stand to inherit a large sum of money like Paris Hilton. They did not strike it rich in the lottery, or win a giant lawsuit. They worked every single day for many, many years at their craft. They built multi-million dollar businesses from card tables in their garages or dorm rooms.

They led large corporations of hundreds of employees. They spent hundreds of hours writing, editing and marketing their book ideas to anyone who would listen. These self-made millionaires did not become overnight successes.

How to Become a Financial “Cinderella?”

• Get out of debt. Carrying around debt is like trying to climb Mt. Everest with a hundred pound weight tied to your back. It is just impossible to become a financial success while carrying around debt.

• Don’t mortgage away your future. When you get pre-approved for a mortgage your lender will likely provide a maximum mortgage that’s way out of your price range. Ignore their number. I personally wouldn’t tie up more than 20% of my take-home pay in housing. Doing so would mean less to save and invest, and that’s a trade off I’m not willing to make to enjoy a little extra square footage.

• Stop trying to impress strangers at a red light. The average new car payment in America is approaching $500 a month. Sell that sporty new car, buy an older, reliable, used car with cash and drive it until the wheels fall off. Keep driving used cars the remainder of your life and deposit that $500 into a mutual fund every single month. In thirty years you will become a millionaire.

• Turn off the television and read to learn something. Knowing the last five winners of American Idol won’t make you a success. Studying the habits of highly successful people will.

• Practice frugality in all areas of your life. Buy clothes on sale; and only when you need them. Avoid paying for name brands when quality alternatives, or homemade solutions, exist. Be a frugal grocery shopper. Eat at home; it is healthier and less expensive. Invest in yourself; you will live longer and pay less for it in medical bills and insurance premiums.

Finally, after a couple decades of sacrifice, determination, and dedication you could become an overnight success, and be called a financial “Cinderella” yourself.

*This post appeared in the Carnival of Personal Finance – Blogthority.com Relaunch Edition

There are a few ideas and terms that the masses throw around in an effort to mitigate risk and be more financially secure. The terms that come to mind are emergency fund and diversification. While these are valid concepts, I don’t think they complete the picture of financial security that we should all strive towards.

Most people would agree that economically, we’re in better shape now than a year ago. While we can debate to what degree, I think it would be wise for us to assume that we’re not better off. We should assume that we’re still in the middle of a recession (we probably are), and that things could still get worse. Furthermore, we should assume that it is very likely that we lose our job or lose our income in the near future. If not a complete income loss, we could easily see an income reduction as business revenues and sales continue to struggle.

I’m not here to convince you that these things are going to happen, but rather to convince you to prepare for the event in which they do. If things turn for the better, the economy improves, and your income increases, then great! If not, hopefully you’ll be prepared. So, what to do?

Redefining the Emergency Fund

Most people understand the purpose of an emergency fund: to save up a chunk of money that can pay for our expenses in the event of income loss or a major unexpected expense. By establishing an emergency fund, you can pay your bills and buy groceries with this fund versus tapping a credit card. This is a smart strategy, but I believe there should be more to it.

Storing supplies and consumable goods should also be a part of your emergency “fund”. Your emergency fund is used to pay for stuff when you can’t afford it. If you prepare accordingly, you can use your funds to pay the bills, but hit up your supply stash for products like toiletries, food, canned drinks, etc. The combination of emergency funds and emergency supplies means you can last longer on your own in the event of a loss of income. Furthermore, using your stored supplies for things like food will prevent you from going out to dinner when you should be saving your money during this phase. Lastly, your storage supplies can double as emergency supplies in the event of a disaster or supply shortage. By adding supplies to your emergency fund, you are increasing both your financial security and your independence; a winning proposition in my opinion.

Diversification of Income

We love to spout the fancy term diversification over and over when we’re referring to our investments, yet most of us go through life being completely non-diversified with regards to our most important financial asset: our income. The simple fact is that too many people rely entirely on a single income and are unprepared for the possibility of an income decrease or elimination. In addition to preparing a robust emergency fund as described above, a second prudent step (especially over the long-term) is to diversify our income.

While employed and making money, it’s important to spend some of your free time working on the development of a second income stream. While everybody would agree that such an idea is a wise strategy, probably less than 5% of people actually act on it. I guess television is too enticing.

To start the process, take an inventory of the skills or tools that you possess. Maybe you have excellent graphic design skills, or you can do a range of household repairs, or maybe you have quality lawn equipment. Next, analyze your contacts that might help you get going on this income/business venture. Who might be potential customers? Who might help you find additional customers?

Growing an alternative income stream takes hard work, and will be much slower than you think since you’re spending your limited free time working on it, but I believe it is a worthwhile process. Be organized, determined and patient. Over time, you will see results.

The great thing about working on a second income stream is that it has the potential to eventually turn into a thriving business. It is a less risky form of becoming an entrepreneur. Even if it doesn’t grow into a huge business, the additional income will help boost your savings and help you survive if you lose your main income.

Conclusion

Financial security is a topic that we should all take more time to thoroughly discuss. I have severe doubts about the years ahead with regards to the U.S. economy; as such, I’m doing what I can to prepare for whatever situations I’m forced to encounter. If I’m wrong on my economic views, I’ll still be in great shape with a few extra dollars in the bank and maybe some stocked closets full of goods to use. Such a conclusion would hardly be a bad one. I strongly believe we should prepare for the worst and hope for the best. When it comes to your finances, this old cliché is definitely applicable.

What are some of the ways you’re improving your financial security?

If you’ve read my blog lately, you may have seen that I don’t live with my wife during the week. My current job is approximately 2 hours away. Because of the distance, I have to stay there during the week and then head home on the weekends.

There are many disadvantages of living away from my wife, both emotionally and financially. I won’t really get into the emotional stuff seeing that this is a financial blog. However, I can shed some light on how we handle our finances on a day-to-day basis.

First, let me give you a little insight into the added expenses. In order to stay in PA during the week, I have to pay for housing, groceries, parking, and fuel. All of those together add about $600 to our budget. Those are all in addition to what we already spend in MD. It’s definitely straining, but it’s better than me not working at all. My wife and I have been apart for long periods of time before (I went to TX for grad school) so we are used to being apart. However, it’s not something I want to do for more than a year.

Even though we are apart, we still need to make financial decisions as a team. Marriage is commitment and both partners need to have an equal say. Here is how we do it:

Communication Is Key

Just as the title says, communication is a key part in our financial decision making. We communicate daily about our finances on the phone and via Skype. We are constantly talking about our budget and how much we will have left over to pay down debt. We actually think budgeting is fun and are always looking for ways to save a buck just so we can pay off more debt at the end of the month.

Financial communication is a necessity is every marriage. If one partner is spending away while the other one is committed to getting out of debt, they’re not going to get far. You just need to sit down and talk about your finances. Heck, if my wife and I can do it every night when we are 2 hours away from each other, so can you!

Long Distance Budgeting

Almost all of my adult life, I have been a Quicken kind of guy. It was always easy for me to use and made my finances come together in one simple platform. Well, when we got married, I noticed one major flaw. It was only on my computer and it was really hard for my wife to understand how to use it. So, we made an executive decision to give something else a try. A written budget wasn’t really an option for us as we are more technical people. It would also be a little harder to keep track of being apart. Then came Mvelopes.

Mvelopes is an online based budgeting program that can be accessed anywhere (with an internet connection). Mvelopes is based on the envelope system which we thought was the best budgeting technique for us (and still do). It allows us to check our budget at the same time and discuss the different envelopes and what we spent during the week. It just keeps us on the top of our game. It also keeps us accountable.

Keep a Positive Attitude

It’s easy to get a little depressed when you are away from your spouse for extended periods of time. It’s especially hard for us since we were married only six months ago. However, we continue to be positive about our situation and are trying to get things straightened out. Currently, I have an interview next week for a job in MD working for the same company. If all goes well and I get the job, my income will increase about 10%. It will also eliminate our need for addition expenses such as the rent.

Well, hopefully you will never have to find yourself in my position. It’s tough,  but we are making it work. If you do find yourself in this predicament, hopefully these tips can help you out. These are actually good tips for couples who are living together too. You need all of these to manage your marriage and finances.

Have a great weekend!

We’ve all made financial mistakes, and chances are we’ll make more mistakes in the future.

Maybe we aren’t socking away enough money for retirement, or overdrew our account, or bought at the peak of the housing market and are underwater. When things like that happen, it’s common to take a step back to analyze our mistakes to see where we went wrong.

While reviewing and learning from past mistakes is good — that’s how we improve and prevent repeats of the mistakes — dwelling on them and beating ourselves up over them isn’t.

But when it comes to analyzing the past, there’s a step we often
overlook: Reviewing our past successes.

Take a moment to think about it. What have you done right lately?

See what you have done well in the past, and what you could repeat in the future. What caused you to make a decision that turned out well?
What traits did your successes take advantage of?

For example, maybe you’ve set up a bill paying system that where you pay your bills at the same time each month. Since then, bill-paying has been a breeze. That takes organization, so organization is probably one of your strengths. How else could you use organization to improve your financial life?

“Make a list of financial goals” is the first thing that pops into my mind when I ask myself that question. Once my list is made, I can set about organizing it further so that I can achieve the items on it.

Or maybe you’ve automated your bills so that they’re withdrawn from your checking account each month like clockwork. And since you’ve done that, you haven’t once overdrawn your account, which was a problem for you in the past. If automation is working for you, look for other areas that you could automate. (Such as retirement, investing, savings, etc.)

Play to your financial strengths and use them to your advantage.

No, I’m not going to list some new vocabulary words for you to use when your account goes down by 20%. Sorry to disappoint.

Instead, I’m going to share with you five 4-letter words that should be in everyone’s vernacular when it comes to their money and finances.

Take a look at the list and see if you are using these important 4-letter words!

1. Save

This should be a common word used in your household.

How much are we going to save and where are we going to save it are extremely important questions to be asking yourself regularly.

What this recent economic downturn taught us is the importance of having some savings built up in case a major crisis hits (i.e. job loss etc.).

The average savings rate has gone up to about 5% according to the Bureau of Economic Analysis.

This is a good trend especially when you look at the chart to see where the savings rate has been in the last several years – but there’s still major headway that could be made. Make sure that “save” is a regular word you’re using.

2. Give

Giving is a key part of being a good humanitarian.

You’ve heard the old saying, “It’s better to give than to receive”. Why is that? Because when we’re less consumed with ourselves and more concerned for the welfare of others it benefits them and brings us more joy!

The most miserable people in the world are generally the ones who are self-absorbed misers.

There are countless numbers of poor, weak and downtrodden folks who are waiting for us to be a Good Samaritan.

Whether you give money to the homeless, volunteer in a soup kitchen, give to organizations that provide relief for the under-privileged – you should find something that you are actively giving your time and money to.

3. Risk

Risk is a four-letter word that gets used often, but many times in the wrong way. What I mean is that most people often assume they are a riskier investor than they really are.

It seems like people love risk in a bull market and can’t stand it in a bear market.

It’s important to review how much risk you are willing to take so that you can create a well-diversified portfolio that should generate more consistent returns with less volatility.

4. Roth

If you qualify for a Roth IRA, this is one four-letter word you don’t want to ignore.

What exactly is a Roth IRA? Basically it’s an Individual Retirement Account with after-tax contributions and tax-free withdrawals.

Given where tax rates are currently (low) compared to where they’re going to be in the future (high), it makes sense to check this type of account out now and put it to good use.

5. Debt-Free

OK you got me, that’s two four-letter words put together, but the point is learning to use these words together will help you get on track for your financial goals so much more quickly.

Resolving to be debt-free is a decision you won’t regret. Sure, it’ll take some discipline, hard work and a lot of sacrifice, but it’ll be so worth it in the end.

How do you become debt-free? First you need to make a decision to go for it. Secondly, put a plan in place to cut back on expenses, increase income if possible and use as much discretionary cash flow as you can to start knocking out your debt!

There you have it. Five four-letter words that are OK to say in front of your kids and even better to implement in your personal finance journey!

Photo by ItzaFineDay

Are the rich really wrecking the planet? Or are we all guilty? Or is it just a select group who have taken advantage of our financial system to maximize personal gain? First of all, I don’t hate the rich. Wealthy people open businesses that create new jobs. They invest in new technologies that keep our economy humming along (or at least sputtering along, as it’s been here lately). Wealthy people are also often the greatest philanthropists. Bill Gates comes to mind. Think of the good that he and his wife, Melinda, have done for others through the Bill and Melinda Gates Foundation.

I recognize that some wealthy people are not quite as giving. They often stomp on the little guy on their way to the top. They are shrewd. They take no prisoners. They lay off employees to save the company’s bottom line, and fatten their wallets. It’s safe to say there are plenty of examples on both sides of the argument.

The Evolution of Shame

Just a decade or so ago being poor was a great source of shame for many families. Most subscribed to the upward mobility theory that all of us should be striving to improve our economic lot in life. Those who didn’t were deemed lazy, unintelligent, or simply not properly motivated.

Slowly but surely things began to shift. A number of corporate scandals from Enron to Bernie Madoff left a permanent black eye on corporate America. No longer was it cool to be a member of the executive level. And then the government started bailing out many of these same corporate types who bailed out with their own golden parachutes, leaving behind a mess for someone else to clean up. The American public became fed up with the corner office. But has the pendulum swung too far?

With the help of the current administration and their unprecedented use of a pay czar responsible for oversight of executive compensation, we now have much more to say about the workings of corporate America than ever before. Is that a good thing? Well, that remains to be seen. But one thing is for sure, it has definitely put a freeze on the spread of capitalism.

Jealousy vs. Envy

We have all felt that little twinge when a friend brags about their new home, or their recent promotion. But I believe there are two fundamental types of jealous people. The first group of people is happy for their friend, and even if they are a little jealous, they recognize their friend has worked hard and with the same hard work they can aspire to similar accomplishments.

The second group of people are green with envy. They can’t be happy for their friend because they are not happy with themselves. If they can’t have something, then no one should have it. There have always been members of both groups, but in the last several years it seems the population of the latter group is growing.

How Does this Affect the Act of Building Personal Wealth?

There are many people out there dealing with shame because of their success. How can they be happy with the wealth they’ve accumulated when there are so many others out there in poverty? How can they be happy living in a beautiful new home when there are others out there homeless? It’s an interesting dilemma. But what’s lost in the worry over perception is the two factors that led to your success: hard work and luck. Yes, both are required for success.

Sherry left a comment on the post I mentioned in the opening that provided a pretty good analogy for this very dilemma:

Unless you amassed your wealth by stealing it from others, I do not understand why anyone would feel guilty. Don’t accept guilt you don’t earn. If you value something (like a charity) then give to support it. I am not wealthy (yet), but am certainly doing better than some of my siblings. However, I don’t feel guilty because of that. Why would I? It’s like feeling guilty that you [make] an A on a test because you studied, but your best friend only got a C.

Some work hard all their lives, but never get that break that separates those living paycheck to paycheck from those with a seven-figure nest egg. Some acquire wealth through inheritance, through lottery winnings, or some other windfall that didn’t require a great deal of hard work.

For every Paris Hilton in the world there are fifty entrepreneurs working 14-hour days for years to become an overnight success. They invest their life savings, give up their social life, and pour 100% of their energy into building a business month after month. Occasionally, someone hits it big and they can finally breathe. They are finally able to enjoy some of their wealth – buy a new home, a newer car, take a vacation or two, etc. Should we resent them for this success? Or should we hold these people in high regard and say to ourselves, “One day I’d like to be just like that guy!”

Money plays an important role in all our lives; the fact that you are on this finance blog reading an article on money illustrates that money is an important topic to you. Earlier I discussed the importance of money and asked if money is the means to an end or an end in itself for you, the responses were interesting to say the least. Although majority of readers said it’s a means to an end, their “reasoning” varied widely. Today’s question is what does money mean to you?

Meaning of Money to You

We are often so consumed by earning money that we forget to take a minute and think about what it means to us; how do we feel about money and how does it effect our lives. For some money is just a necessity, they need/want just enough money to meet life’s basics needs. To other’s money means freedom and independence. Take a minute and think about what money means to you.

What feelings does the thought of money bring up? Is it worry, joy, freedom, anger, power…?

Do you give a percentage of your income to a charity? Do you share your wealth or do you control other’s with money?

For me the meaning of money has changed over time, when I was very young my parents were well off and I enjoyed more luxuries than most of my friends, but my parents fought constantly over money. As I grew older my parents lost all their wealth and I spent my teens being fairly poor compared to my friends while my parents continued to fight over money and eventually divorced each other. At this stage I developed an extreme hate for money, the thought of money would make me angry. As I grew older and started to earn some money, the meaning of money changed for me. Now money is a tool for me, it’s a tool to accomplish things and get what I need/want. Does it mean freedom to me? No it does not and I do not understand those who say money means freedom to them, if your freedom is dependent on money how free are you really? Aren’t you enslaved to money and money is your master? What will happen when you lose your money?

Although the meaning of money to me has changed over time, it has not become a symbol for freedom or independence.  What is the meaning of money to you? Has it changed over time?