Awkward topic: You need to cut off your kids

You may think what I teach is obvious, and in some ways you would be right. Math is simple and irrefutable. But then so is the evidence against smoking and you still see people smoking all the time. You may know getting into credit card debt is bad, but it doesn't stop you from wracking it up like it's your job. We are constantly doing things we know are bad for our financial lives. This is why I don't only teach math, I also teach about money behavior. How to identify it, redefine it, and reestablish it. Which often means things get awkward. 

The entanglement of family and money is one such topic. I'm talking specifically about parents and children being financially entangled beyond a typical timeline.

As a parent your role, from the very beginning, is to step in and fix problems, no matter how ridiculous (I'm looking at you toddler years). As your kids grow older you might be able to work in a moral lesson, but you are still there to solve the problem. This is a very hard habit to break. So hard in fact that most parents just don't. They are there when their 25 year old son's rent is late or their 30 year old daughter needs $5,000 to start a new venture. You are there to support and love them, except… financially supporting adult children isn't love. I warned you this would get awkward! 

And let me be clear, when I talk about supporting adult children I'm not just talking about paying their rent, I'm talking about extravagant gifts too. If your kids expect cash for every holiday they will become dependent on the income. Oh but we haven't even gotten to the awkward part yet. Ready? As parents, it's all your fault. Why? Because if your kids are coming to you with cash flow problems it means they aren't resourceful, and how did they get that way? Because you didn't teach them how to be resourceful. Forgive the allusion to an old maxim, but if you give your kids money they'll just keep asking for it, although if you teach them how to be resourceful they will be able to manage their funds on their own.

Just like trying to quit smoking, cutting off your kids will take time and a lot of self-discipline. Here are 3 tips for helping you manage the transition:

1. Impart knowledge. There's no need to cut them off without a lifeline. The lifeline here is knowledge. Teach them how to budget, remind them to spend less than they make, etc. If they are frequently running out of money, chances are they don't even know the basics.

2. Love them in other ways. Instead of cash gifts, give them basically anything else. Seriously, anything is better than cash.

3. Say no. Practice with me, Mom, can you help me pay my cell phone bill? NO. Dad, can you lend me $300 for my car payment this month? NO.

You've got this.

Need further inspiration? Listen to this segment from The Pete the Planner Radio Show on WIBC

What’s your vice?

No matter how tight you keep your budget, there is always some thing you are apt to overspend on. A vice is defined as a weakness in character, but for our purposes we'll go with a more lenient definition. Our new definition of a vice is it's something you admit is important enough to you that you allow yourself to spend frivolously on it. At some point we are going to work the word 'moderately' in there but are you with me so far? If you are, your vice probably popped into your head immediately. Since I brought up the topic, I'll share mine, my vices are clothes and eating out. And as much as I'd love to just go crazy spending on these things, I limit myself. One, because if I didn't it would drown me, and two, by limiting my spending I increase my enjoyment when I do spend on them.

You should be able to name yours quickly, but to help jog your memory here are a few common vices:

- Cars

- Home decorating

- Shopping

- Dining out

- Beer/wine/alcohol

- Hobbies

- Exercise

- Music

- Movies

- Travel

- Technology

- Pets

- Socializing 

You're probably thinking, how is exercise a vice?? But hear me out. Per our new definition, a vice is something you spend frivolously on, meaning you are spending more on your vice than is likely necessary. A gym membership is something which can easily fit into many budgets, but if you're a member of the fanciest, most pimped out gym in the city, chances are you're spending more than you need to. And that's okay, as long as it fits my vice budgeting criteria. Of course, there are criteria! Don't act surprised.

Vice Budgeting Criteria:

- Moderation. I could just stop here, but since we're talking about vices you probably aren't thinking clearly when faced with your vice of choice. Moderation really is going to be your friend here. If you use all your powers of will, and manage to spend in moderation when it comes to your vices, you can enjoy your vice while avoiding going over budget, or worse going into debt.

- Use 50% of your surplus. If you are meeting all of your obligations each month, including paying all bills, saving money regularly, and contributing to your retirement account, then you can spend 50% of your surplus each month on your vice. Why 50%? Because you need to limit yourself. Whether it's a college fund for the kids or a down-payment for a house, the other 50% needs to do something for your future. But, there's a catch with the 50% surplus rule…

- Don't spend over 5% of your take-home pay on your vice. If you bring home $4,000 a month and your monthly surplus in a given month is $500, and you use 50% of this on your vice that's actually over 6% of your monthly take-home pay. This is too much to spend on a vice. So here's the rule:

Net Monthly Income x 5% = Your Vice Budget

You just have to remember, you don't get to spend 5% of your budget on your vice, unless it's surplus. This isn't some extra budget category you get to add just because. This is a reward for spending less than you make. Let me put it this way: If you bring home $4,000 a month and your surplus is only $200 a month, you don't get to use the whole $200 on your vice. You have to first divide it in half which leaves you with $100 to spend on your vice and $100 to spend on other goals. Conversely, if we go back to the original example where you have a $500 surplus, you would use $200 for your vice and $300 for other financial goals.

It's a lot of rules, but here's the thing, by definition your vice is something you are buying with a 'who-gives-a-crap' attitude. So you need to learn and know these rules by heart so when you are faced with a major vice purchasing scenario the rules will kick in automatically. Spending smarter is the best way to get what you want all around. 

Email question: Should I choose cash back or 0% interest when buying a car?



My wife and I are looking at buying a new car. We've weighed the pros and cons of buying new vs. used and to make a short story long we decided to buy a new car based on a couple of different things.


1. The same model cars that are one or two years old are currently only $1500-$2000 less than the new ones ($18000 new or $16500-$17000 used).

2. The new cars have an offer of $1500 cash back or 0% financing for 60 months.


I had read your article regarding "cheap" money and was wondering if I could get your thoughts on this situation.


We currently get 2.5% back on our checking account (really this is our our savings account but the savings account gets bupkis% so we leave little in there) and have $10,000 to put towards a car. We can get a car loan from our bank at 2.2% so there is still have margin if we got the loan from our bank.


My question is would it be better to buy a new car and get the $1500 cash back (making the purchase price similar to a used car) with a small loan from the bank or finance the entire car at 0% for 60 months and let our $10k grow?


Much appreciation,


Hey Alex,

Great question! I can tell from your "short story long" that you and your wife are intelligent people making smart choices.

From the information you provided, I agree with you that in this case buying a new car instead of a used car is the smart choice. This is not the standard case though. By my math there is only an 8% difference between the new car and the slightly used car you mentioned, this is very low and uncommon. So again, I agree with you, but only in this case.

As far as the $1,500 cash back versus the 0% financing for 60 months goes, we'll need to dig a little deeper. Here are a few factors you need to keep in mind:

- Your checking account earns 2.5% interest (which is amazing by the way, where do you bank??), which means if you left the 10k in your account it would earn about $250 this year. You are actually using the "cheap money" argument correctly, since the interest rate you would earn on your 10k is more than the interest you would pay for a car loan, but…

- Using the 10k as a down payment and taking the $1,500 cash back would lower the amount you would need to borrow to $6,500. Which in theory you could knock out pretty quickly. 

- Another option would be to use the 10k as a down payment and do the 60 months with 0% interest option. But really it all comes down to…

- Your motivation. What are you and your wife going to aggressively work on accomplishing? If you use the 10k as a down-payment, are you going to work hard to re-save the money? Or would you work harder to pay off a car loan? Would a 60 months deadline light a fire under you? Knowing what motivates you will play a role in how you make this decision.

- Also it's worth asking, if you decide to use the 10k on a car, will it wipe you out entirely? I've found many people work super hard to save for a down-payment or car and then clean themselves out to make the payment. This is never a good idea. You need emergency reserves on top of any down-payment you make. If you have excess beyond the 10k then use the 10k to make a large payment, and get a loan for the remainder.

- I'm aware I didn't cleanly answer this question. It's a complex one and in all honesty you can do any of the above and you'll be fine. Two responsible people like you and your wife are going to do fine whatever you choose. 

I also answered your question on The Pete the Planner Radio Show this week on WIBC, listen below to hear a fuller answer. 


Lower your utility costs to free up cash

Your utilities are a necessity, which is often why they are the budget category that gets the least attention. Necessities tend to equal an "it is what it is" attitude in people. For many it's easier to cut costs in the less necessary categories like gifts and entertainment, but I want you to rethink this attitude. There are actually plenty of ways you can lower your utility bills, and most of them are free. Just because you need water and electricity doesn't mean you have to pay huge chunks of money for them each month. 

Consider doing any of these 5 things to lower your utility costs:

1. Turn off lights when you leave a room

I'll start with the most obvious one. Seriously, if you aren't turning off lights when you aren't using them, you need to get yourself together. Change your habits now because your carelessness is costing you. The same goes for outdoor lights. Lighting a backyard for 12 hours at night isn't the best use of money. Switching to a motion-detecting light will save you money and fulfill the same purpose of detouring intruders. 

2. Conserve water

Conserving water gets a bad rap. I'm not asking you to cut down your shower time or to stop watering your yard (although doing both of these would cut your water costs), there are other, less invasive ways you can lower expenses. The easiest option is to invest a few bucks in low-flow faucet aerators and low-flow shower heads. The best part isn't the money you'll save, it's how you won't notice a difference in the water pressure. It's the same pressure, just less water. Wrap your head around that one. 

3. Check for air leaks around windows and doors

Even newer homes aren't immune to air leaks. Walk around your house with your hand around the doors and windows. Do you feel drafts? If so seal it up. There are plenty of easy and inexpensive ways to seal air gaps. You are paying to heat and cool your house, so assuring that the conditioned air stays inside is a priority.

4. If you're cold, do what your mom told you and put on a sweater

You want your house to be a place of comfort, but sometimes it isn't worth the extra cash. You may like a warm and cozy home, but the higher your thermostat is set, the more you'll spend. So put on a sweater or turn on a fan in the summer. Keeping your thermostat set a few degrees outside of your comfort zone will mean lots of savings on your next bill. 

5. Install a programmable thermostat

Buying a programmable thermostat is taking #4 to the next level. A programmable thermostat may cost a few bucks, but being able to keep temps at a more energy efficient level when no one is home just makes sense. If you can't afford a programmable thermostat, don't sweat it, just get yourself in the habit of lowering or raising the thermostat before you leave for work. Your house may be a little warm/cool (depending on the season) when you get home, but your system will catch up to your desired temp quickly. 

Don't let utilities become a "fixed" expense in your budget. What you do impacts your utility spending. Making small physical changes as well as creating new energy-efficient habits means you can reduce your utility expenses. Another common utilities concern is how unpredictable and uneven your bills are throughout the year. Many utility companies offer a budget option which usually means you pay a flat rate throughout the year based on your past year of expenses. At the end of the year you either get a reimbursement check or a bill for the difference. It can be a great program, but do your research and determine if it's the right thing for you.

Don’t underestimate the budget-friendly staycation

Staycations get a bad rap, mostly because of the atrocious mashed-up name. Someone called me an edutainer the other day. What? No. Anyway, the staycation. Bad name, bad image, but great for your budget. That's why people take them, right? Because they can't afford a "real" vacation. Here's the truth about staycations, they aren't crappy, your attitude about them is crappy.

I just said this yesterday, but I'll say it again, most people's verbal priorities don't line up with what they are actually doing. You say your kids' education is the most important thing, but when it's summer and you need a break, going on a tropical vacation is your #1 priority. Don't get me wrong, I understand. I want to go reset at some luxurious destination as much as the next person, but if my finances don't justify the expense, no amount of desire can bridge the gap. Although, this doesn't mean you don't deserve some sort of break from working. This is where a staycation can meet both your personal needs and those of your budget. 

A staycation means you not only save on lodging costs, but also traveling expenses. Think of it this way, your house is the staycation epicenter and there's an invisible radius around your house which extends an hour or two out. This is your staycation playground. You'll have gas and food expenses, but you'll come home every night. Also, can we talk about how nice it is to sleep in your own bed on vacation? Actually, the kids being in their own beds is the true cause for celebration. 

Here are 4 tips for making the most of the best-financial-decision-you've-ever-made staycation:

1. Change your attitude

I hear this excuse a lot, "my kids just really want to go to the beach." No they don't, you want to go to the beach. Adults ruin staycations, not kids. You control what your kids want, you are the rudder. By changing your attitude about staying in town to vacation, you can influence those around you. 

2. Make a plan

Just taking time off work to stay home isn't a staycation. A staycation requires a plan. It's the ultimate test of resourcefulness. Do research on what attractions are in your extended area. Better yet, go to a big truck stop or a local hotel and grab a bunch of those tourist brochures. You'll be surprised by how much there is to do within driving distance of your home. And guess what? Those new and cool things you discover on your staycation? They are close to your home which means you can do them any time you want. 

3. Get others involved

One of the bonuses of a staycation is you're near friends. Rope them into your adventures. Most people never get the chance to vacation with friends, staycations give you the opportunity. 

4. Do vacation-like things

What's a dream vacation for you? Swimming? Boating? Taking in the sights? Then do it. Find a way to satisfy all your vacation desires close by. It is possible. 

Staycations can be dirt cheap, and if you do it right, they can satisfy all your vacation desires. Your biggest obstacle is your attitude. To hear more, listen to this segment on The Pete the Planner Radio Show on 93 WIBC.

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