Budgeting

Pete the Planner and IU’s financial podcast for students

IU Moneysmarts

You asked for it. What? You didn’t ask for it? Well, somebody did. Here is the How Not to Move Back In With Your Parents podcast that I created with IU Money Smarts.

Are you a college student? Do you know a college student? Have you met a college student? Were you a college student? Will I stop asking questions? Be sure to pass this link on to them. In just eight minutes per week, we plan on changing the financial decision-making of college students. We discuss budgeting in college, work income, credit cards, student loans, and a ton more.

You don’t have to be one of Indiana University’s 130,000ish students to listen to this podcast. IU wants to help educate all students around the world.

Enjoy!!!

How not to move back in with your parents

5 ways in which BSing yourself about your financial life can hurt you

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In 1994, I tackled Chad Patterson….at varsity basketball practice. Chad was one of the star senior players (and a really good dude), and I was a solid sophomore point guard that played a little bit of varsity. I denied tackling him on purpose, for nearly two decades. I was just coming off of football season, and I blamed it on my football legs. But I tackled him on purpose. I pretty much had BSed everyone else in the gym that day. I even convinced myself that I didn’t tackle him on purpose. Did I mention he was dating my ex-girlfriend? I tackled him on purpose. Lying to yourself is great and all, but what’s the point?

I’ve had hundreds, if not thousands, of people lie to me about their financial lives. I don’t really care whether they are lying or not, because I usually have the numbers in front of me, and the numbers rarely lie. I’m usually more concerned that people believe their own BS. When someone starts lying to me, I think to myself, “I wonder if they believe this crap.” If they do believe the ish they’re spewing, they’re in trouble. Believing your own BS is always a recipe for a financial disaster.

Below, you will find the five biggest loads of crap that I hear on a regular basis. Again, I don’t really care if people lie to me. I’m just trying to help. I’m more concerned that they’ve started to believe the lie, and are on some sort of mission to find the real killer, when the lie itself…well…you know.

1. “I’ve got plenty of time to save for retirement”- Um, no you don’t. There are two factors that are important in any accumulation plan: money and time. You need both. You need to invest money for the future. And you need time to do what time does. I believe that time is the most important element of retirement savings.

2. “I spend the same amount of money on my credit card as I would if I just were to use my debit card for monthly spending.”- Things I’ve never heard a debit card user say: I spend between $1500 and $3500 per month, on my debit card. Do you know who says these sorts of things? People who use their credit card for everything, and then pay it off at the end of the month. While refusing to carryover a balance is a good practice, it also creates a blank check mentality which induces freer spending.  You don’t have to believe me. Just put down your credit card for one month, and do all your spending on your debit card. You will spend less. And I don’t care about your points. Please shut up about your points.

3. “I have plenty of life insurance.”- You probably don’t. I’ve never quite understood people’s general aversion to life insurance. We’re all going to die. You don’t seal your fate if you buy life insurance. You actually seal your fate if you don’t buy life insurance. Why would you want your significant other and/or children to suffer financially, at your eventual demise? When you die, your income dies. And if your family depends on your income, then you are putting them in a terrible position. Skip a few trips to Applebee’s and buy the right amount of life insurance. Most people need about ten times their annual income in life insurance.

4. “I’m very aware of my finances. I check my bank balances daily.”- Do you know what online banking has done to financial awareness in this country? It is has killed it. And not “killed it” in a good way. Online banking has become a financial crutch for the apathetic. Do you think people in the 1980′s checked their check register every single day? No. They didn’t. Did they save more of their disposable income? Yes. Did they have less consumer debt? Yes. Online banking is a convenience tool, not a financial tool. If you were financially aware, you wouldn’t need to look so often. The more times you look, the more money you will spend. It’s called “balance spending,” and it’s real.

5. “I don’t need financial goals. They’re stupid and pointless.”- Okay. I don’t understand why people fight goals. You aren’t signing-up to walk on hot coals. You’re simply letting a piece of paper know what’s going on inside of your tiny dinosaur brain. The strangest thing about not writing down financial goals is that it actually makes your financial life easier, not harder. Sure, some goals will cause you to increase your effort, but most of the time, goals just allow you to better focus whatever effort you are currently giving. Start with 30-day financial goals. What would you like to accomplish financially in the next 30 days? How much money will that require? How would accomplishing this goal affect your life?

You can lie to me. You can lie to your friends. You can lie to your spouse. You can lie to your boss. You can lie to your dog. You can lie to your financial planner. You can lie to your hair stylist. You can lie to your therapist. You can lie to the IRS. You can lie to everyone at your high school reunion. Just don’t lie to yourself.

Sorry, Chad. I tackled you on purpose.

Why I’ve never written about how to become a millionaire

wealthI don’t like to think about other personal finance experts as competitors. I like to think of them as teammates. My goal is for people to find financial wellness. If they happen to find it through the inspiring words of someone else, cool with me. Why would that bother me? At times I disagree with some of the teachings and ideas of other experts, but I keep those to myself. I know that people disagree with some things I say, but I just chalk it up to different strokes for different folks. There is one topic that most everyone else has weighed in on, except me. That’s the concept/idea of becoming a millionaire. In fact, I don’t think you can find the word millionaire on my website, five years worth of radio shows, or any of my five books.

My aversion to the quest to being a millionaire is certainly conspicuous in its absence, if you follow other personal finance experts too. I don’t talk about being rich. I don’t want to teach you how to be rich. I want to teach you to be resourceful. I believe that wealth is a side effect, not a goal. What good is a big pile of money, if you don’t know how to handle it? Patrick Ewing said it best during an NBA Players Strike back in the day, “we may make a lot of money, but we spend a lot of money too.”

There’s one concept within personal finance that I’m currently obsessed with. I’ve written about it in The Indianapolis Star, discussed on my radio show, and have talked about it to thousands of people that were part of recent live audiences. I believe that we should all be on a lifelong mission to break our dependency on our incomes. If you’ve taken a look at my Four Financial Stages, you’ll see that I want people to save at least 20% of their income as part of the Arriving stage. The reason why, might surprise you. Whereas I obviously want you to accumulate money so that you can fund your eventual, but not guaranteed retirement, the real reason I want you to save at least 20% of your income is much more important. I want you to demonstrate the ability to live on only 80% of your take-home pay. This is all part of a strategy to reduce your dependency on your work income.

If your income consistently rises, and you don’t consistently save your raises, after a certain level of comfort is achieved, then you are creating a nearly insurmountable mountain of dependency. You can accumulate a million dollars, but if you need $100,000 per year in retirement, then you’re going to be in trouble. I believe if you focus on the wealth, then you are focusing on the wrong goal. I believe people act differently when wealth, not resourcefulness, is the goal. I believe greed and emotions can cloud otherwise good judgement.

Think about most of the financial planning commercials you’ve seen. What is the message? In my unabashed opinion, the message is that accumulation is the key. I disagree with this message . You can’t accumulate money without resourcefulness. When wealth is the goal, then the focus turns to assets, not income. This means that people worry more about what their investments choices are, rather than how their income should fund their investments.

Maybe I’m crazy, but dangling wealth in front of people in order to get them to care, doesn’t seem sincere to me.  I think you discredit your audience when you make financial wellness about wealth. In most cases, I believe that behavior is to blame in both success and failure. That’s why I want the discussion to revolve around the behaviors that lead to resourcefulness.

I’m personally striving for a mindset in which money is a byproduct of my work. This doesn’t mean that I’m going to live in a hut in the woods and purify my urine for drinking water. It just means that I’m trying to measure my satisfaction on a non-monetary scale. When wealth is the goal, you will ALWAYS measure satisfaction on a monetary scale.

I don’t believe we sell ourselves short when we strive to be resourceful. Resourcefulness isn’t about being cheap. It’s not about penny-pinching. To me, it all boils down to this very simple idea: a person that isn’t resourceful doesn’t ever have enough resources. Wealth CAN’T be the goal.

Emailer has money to pay cash for car, but should he?

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In a perfect world, we’d pay cash for our car purchases. Not having a car payment is one of the best things ever. But what should you do if the car payment is going to drain your savings? I recently received the following question from an emailer, and I answered it on The Pete the Planner Radio Show.

Dear Pete,

I have a quick question for you I think you might be able to provide some insight on.  I recently graduated from college and I’ve started my first real job.  I’ve been fortunate in being able to work from home for the first couple months but soon I will need to move to the home office which is in another state.  I have been borrowing a family car when I needed it living at home.  I’ve tried to be pretty frugal through college and I have about $10,000 saved up through my time at this job and from working through college.  I will need to buy a car within the next few weeks and I am strongly opposed to financing one.  Do you think it would be a better idea to buy an older car for $3-4000 and maintain my cash which I’ve been working on building as an emergency fund? Or should I buy a newer car for $8-9000 that might last me longer but if I ran into trouble I wouldn’t have much to fall back on?  My medium term transportation plan is to spend the next 4 or 5 years paying myself a car payment so that I can buy the next car albeit a nicer one in cash as well so whatever I purchase needs to be reliable for at least that long.  Extra information: I have no student loans and I make a livable but not excessive recent graduate salary. I will pay around 350$ a month for rent with a room mate.  Also probably add 100$ a month for food. Other than that expenses shouldn’t increase too much. After taxes withheld, insurance, 401k contributions, savings, rent, food and gas I expect to have around 500$ leftover from each month’s check.

Larry

Good question, Larry. Here’s my answer.

Pete the Planner and Indiana University create financial podcast for students

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I’m pleased to announce my partnership with Indiana University and IU MoneySmarts. As you know, financial wellness is vital to creating balance in one’s life. Indiana University recognized this and created a department of financial literacy in 2012. The mission for IU MoneySmarts, the name given to the program, is to increase the financial acumen of all students and prepare them for managing their finances both during and after college.

This is a monumental task, for several reasons. To be frank, learning about money isn’t exactly high on the college student priority list. IU MoneySmarts has done a great job making their resources approachable and palatable. As part of their efforts, IU MoneySmarts decided that a snappy weekly podcast would be a good idea.

Enter Pete the Planner.

After five years on the radio and a decade of teaching nearly every demographic about money, I’m confident that our podcast, How Not To Move Back In With Your Parents, will hit the mark. I recruited my wunderkind intern and IU student, Alex Eaton, to be my co-host, and the rest is history. Indiana University has placed the podcast on their student mobile app so that students can absorb the information on their own schedule.

The podcast isn’t IU specific. This means all college students can use the podcast to build the foundation of their financial lives. This shows IU’s commitment to education and community learning. Want to hear the first episode of How Not To Move Back In With Your Parents? You can find it right here.

IU continues to innovate and create meaningful program for its students. I’m very honored and thankful to be a part of it.

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