8 Lies We’re Told About The “Real World”

This is so true. Couple things to add –

1. There are no labels – Ashley is definitely right. One of my conservative friends like to speak disparagingly about another friend of mine because he is a “leftist.” Understanding where this “leftist” is coming from is, of course, out of the question because he’s a “leftist.”

2. Dating becomes easier – I actually thought dating did become easier. For one thing, dating was actually possible in my 20’s. No one would give me the time of day in high school. So all the stupid dating mistakes most people make at 16? Yeah … I made those mistakes at 20. And then I decided that I didn’t give a shit about the games and I’d just go with being honest. And blunt. Amazingly, this worked pretty well.

3. You should finish college if you want to be successful – Ashley phrased this really well. I finished college with the specific objective of being employable afterward. I treated college like an investment in my future ability to provide for my family and it worked out great. It didn’t hurt that I studied accounting, a field with great job security. But I have also see too many people piss away their 20’s by switching majors 6 times, never finishing a degree of ANY sort, racking up a bunch of student loans, and then wonder why they can’t get anywhere in life except for a dead-end job with a good chunk of their wages garnished to pay back their student loans.

4. College will be the best years of your life – It was for me! But not for the reasons most people think. I was a single mom on public assistance and I lived in a family-friendly university housing complex. I had the flexibility to be the parent I wanted to be, I had great relationships with my neighbors, and we all just had this big sharing circle of kids’ clothes, advice, support, and even friendship.

5. Honesty is the best policy – I still do believe that honesty is the best policy, but there is an art to being honest. If I have to tell a client that the shit their pulling won’t fly, I don’t say, “The shit you’re pulling won’t fly.” Instead I say something like “You may want to consider X because Y. Also because we won’t sign the report if you leave it like that, but mainly because Y.”
Honesty also worked will for dating (see #2). I went on many first and only dates where I wasn’t into the guy. Instead of the usual, “Oh yeah sure I’d love to see you again, blah blah …” I said “You know, I’m not really feeling it.” Cruel? Maybe. Disarming? Definitely. But neither one of us had to waste any more time on something that clearly wasn’t going anywhere.

6. You have to choose between a career or family – I’m spoiled. I have a stay-at-home husband. I have no idea how I would be a halfway decent mom to our 3 kids without him.

7. Time heals all wounds – Over time, the new normal feels, well, normal. Over time, the work of healing begins to be effective, assuming you are in the right circumstances to heal. But no, time by itself doesn’t heal anything.

8. Success comes with hard work – nothing to add here. Ashley’s spot-on.

Questionable financial advice: on credit scores

I swear that this is not going to primarily be a personal finance blog.  I just happened upon something else in that arena that I wanted to share comment on so I can hopefully correct bad information.

Of course it’s Mr. Ramsey again:

Dear Dave,

I’m 20 years old, and I’m trying to get out of debt. However, I’m concerned about what might happen when I’m older and don’t have a credit score. My girlfriend says I won’t be able to get a job or rent an apartment without a good one. Is this true?

Ian

Dear Ian,

No, it’s not true. I’m sure your girlfriend is a sweet person, but she has no clue what she’s talking about in this situation.

In either case you can simply explain that reason you don’t have a credit score is because you have no debt. Since you don’t have any debt, you have something known as money. That makes you very stable, and it makes you a fantastic candidate as an employee or tenant.

Listen to me, Ian. I’m a landlord, and if I had my choice between a tenant with no debt and no credit score and someone with a high credit score but lots of debt, I’d take the one who has no debt in a heartbeat. Why? Because that’s the one who is most likely to pay.

Besides, you already have a good credit history if you’ve paid your bills on time. Show them proof of that, if necessary. But taking on a pile of debt to have a high credit score or increase your current score is just plain stupid!

—Dave

See also his blog post here, in which he advises that a credit score isn’t important if you’re out of debt.

Here’s why that’s bad advice:

First of all, I mentioned here that all debt is less than optimal.  I’m working on getting out of debt myself.  But more and more, certain types of businesses check your credit score either as a precondition to doing business with you or as a way to help set your rates.  For example, insurance companies (auto insurance is still mandatory, no?), property management companies (from whom you can rent a place to live), even employers are checking credit as a way to evaluate both how trustworthy you are and how susceptible you might be to bribery from less-than-savory characters.  Back in the day, one of the conditions for maintaining my TS-SCI clearance was a certain level of financial responsibility, commonly expressed in a credit score.   Most places don’t know any other way to evaluate, and are not open to any other way to evaluate a person’s financial responsibility other than a credit score.

That means there’s no “explaining” that you have no debt or alternatives such as showing proof that you pay your bills.  If a company’s policy requires a certain credit score to do business with you, then that’s what they’re going to need and there’s not much they can do about it.  Although Dave might prefer a tenant with no credit score, unless you can rent from Dave, you will probably need a credit score.

Also, simply because you are out of debt doesn’t mean that you have the money lying around to, say, buy a house or replace your clunker of a car.  Guess what you need for those things – financing!  Guess what you need to secure financing – a good credit score!

Finally, creating and maintaining a good credit score doesn’t have to mean taking on “a pile of debt.”  Since I have a decent credit score and excellent cash flow management skills, I may share what has worked for me and what I have seen in another post.

Bottom line – pay attention to your credit score!  It is increasingly the key to being able to move through life financially.

Questionable financial advice: on homebuying

Let me just start off by saying that Dave’s not a bad guy.  He means well and his advice is usually pretty good.  Certainly much better than no advice if you really need to figure out which way is up.

But I do have a couple bones to pick with his “5 Must-Do’s Before You Buy a Home” –

1. Kick debt to the curb and pile up cash.

Sure – this is optimal.  Not going to argue that.  But I completely disagree with the idea that you should hold off building your own wealth (i.e. equity in a home) and continue throwing money at someone else’s income statement until you have competed this step.  Especially considering that it is increasing impossible to begin life without debt of some sort – student loans, auto loans, even a credit card balance to pay moving expenses while you get set up.  If you follow this advice you will not begin to build wealth until very, very late in life.

“Most people don’t wait to have this foundation in place when they buy, which leads to tough times when they face unexpected expenses or job loss.”

Sure – but you can either have those tough times as a renter or as a homeowner with an actual asset to your name.  So this particular point makes no difference either way.

2. Set yourself up to win with a nice down payment.

Again – sure, this is optimal.  Not going to argue that.  But again with #1, you are facing a HUGE opportunity cost if you spend your life getting to this point (and paying thousands and thousands of dollars in rent that could be working toward equity in your own home) before you consider buying a home.

3. Keep your budget conservative.

Now this one I am 142% behind. (Can I even be 142% behind something?  Sure I can!  It’s my blog; I can do whatever I want.)

This is ESSENTIAL.  Figure out how much money you can comfortably commit each month, then use a mortgage calculator using conservative estimates of your interest rate (at least 2% over what you expect to get), insurance, property taxes, PMI, and flood insurance (if you think you need it).

“And don’t forget, your new home comes with extra costs like yard maintenance, roof replacement or repair and upkeep for your heating and cooling system.”

Yup.  Don’t forget those things, too.

4. Don’t let emotions rule.

142% agreed here, too.  This goes along with #3 above – figure out your (conservative) budget, aim for lower, but don’t go one penny above what your limit is.  You will be grateful for your self-discipline when those unexpected expenses come up.

5. This is no time to go on autopilot.

This.  Exactly.  When we bought our house, getting the offer accepted was the easy part.  Make sure you know exactly what you need to do, WHEN it needs to be done, and then get it done early.

Other thoughts – 

“All debt is bad debt.”

No.  All debt is less than optimal.  There’s a difference.  All things being equal, you shouldn’t go into debt.  But all things are not equal – sometimes (err … often), the cost of NOT going into debt is far too high.  Examples abound – college (assuming you treat college as an investment and chose a major with good job prospects), cars (you need something safe to transport your family), medical bills (because home births aren’t always the best idea), moving expenses (to get to the job you got hired for after college) … I could go on.

The name of the game is cash flow management.  Figure out what you need, don’t pay more for it than you have to, add up your income, add up your monthly commitments (i.e. payments for things), and use the rest of your money for groceries, gas, and paying down the debt you have.  Being debt-free is a great way to live, and I hope to get there someday, but it’s just not possible to start out that way.

When is it a good time for me to buy a home?

When you can afford it (see #3 above), and when you know you are going to stay in the same place for several years.  There are significant transaction costs to buying and selling a home, so this isn’t something you want to be doing very often.

Take notes from friends and family that have bought houses so you figure out what your must-haves are.  A home is a BIG purchase, so you need to know what things will make it worth it for you to commit to a house.  Do you need a park nearby?  Do you need a particular school district?  Do you need a Starbucks around the corner? (Not that I know ANYONE like that ….) Do you want to be within 3 miles of an emergency room?  Once you find a house that meets all your must-haves that you can afford (see step #3 again – I can’t emphasize how important this is), then GO!

Have fun – enjoy the ride!

“Entitled” to babysitting?

I ran across this post, and I was really taken aback by all the snark.  Why was I surprised?  It is the internet after all.  I guess I just expect more of people.  It’s a character flaw.

Here’s my response:

To me, the mission-critical elements are –

“[Mark] and his wife, “Sue”, are always offering to watch our children so we can go on a date because we never get the chance. Then when we actually need help, they never follow through.”

And –

“Mark & Sue have also implied they would want us to babysit when their children are born …”

This. Right here.

Yes, yes, no one is entitled to have anyone else babysit for them, but “good friends” don’t make idle offers. If they do, they’re not good friends. You and your fiance are perfectly justified in being frustrated with them.

That said, I’m going to assume that Mark and Sue, since they don’t have children yet, don’t really appreciate how helpful it is to be able to get out of the house once in a while. So I would table this discussion until their own child is born and then THEY want to get out for an evening. I see a couple possible outcomes –

1) You all develop a rhythm where you fairly and equitably trade babysitting services; or
2) You babysit for them (once, maybe twice) without reciprocation. After that, I would be “busy” anytime they ask until they reciprocate.

As far as the bachelor party specifically …. as long as not too much planning has been done, I’m actually on your fiance’s side here. If I’m reading your submission correctly, and your fiance says he would rather have a night out with you than a bachelor party, he should stick to his guns. There’s no law that says he HAS to have a bachelor party, and if Mark is willing to go to the effort to do something for your fiance like plan a bachelor party, he should be willing to go to the effort to babysit, especially since he had offered to babysit, multiple times, LONG before he even thought about planning the bachelor party.

Also, regarding the weirdness about guys babysitting … that just seems a little over-the-top.  But then again, maybe I’m biased because my husband is a stay-at-home dad, so he’s alone with the kids every day.  Plus, plenty of women are lethally abusive to children, so it would seem to me that having gender-specific hangups about who watches your children is a little old-fashioned.