Tuesday, November 29, 2016
Besides being the time of year for holiday celebrations and all that goes with the season, it is also budget time. Corporations are fine tuning their budgets for January 1, not-for-profits are finalizing final numbers for review and approval leading up to July 1 and personal family budgets are stretched due to the holiday season and tax time fast approaching.
It has always been my belief that there are three budgets to this cycle: the operating budget, the capital budget, and the hope and pray budget.
Budgets help direct our spending, but by nature they constrain us. While that doesn’t sound very fun, these restrictions are for a good cause. By voluntarily limiting short-term spending, we can stay out of financial trouble and work toward achieving longer-term financial goals. Though it sounds contradictory, we achieve financial freedom by choosing to limit ourselves.
In theory, if we could predict all of our expenses then we could live on the bleeding edge (paycheck to paycheck, revenue stream to revenue stream) of our income and not have to worry. In practice, it ain’t happening — at least not long-term. ‘Life’ happens to us and our budgets.
If you’ll bear with me, let’s set a scene: Picture driving along a winding, coastal road. Nice, isn’t it? You should probably picture yourself in a convertible if you aren’t already. Better. Are you smelling that salty, sea air? Mmmmm. Now, think about that road. It is made up of asphalt, lane lines, maybe a rumble strip or Bott’s dots, a bike lane, a guardrail, and sits atop a hillside or cliff leading to that beautiful beach below.
You get to safely enjoy this wonderful scenery while travelling rapidly because someone at some point decided to put some paint on the ground, and for some reason you decided to follow said paint while you drive. Would it be more scenic if the guardrail wasn’t there partially blocking your view? Probably. Would the driving be more fun or exhilarating if the lane went all the way out to the edge of that cliff? Fun for some, scary for others.
You can probably see where I’m going with this. Let’s think of this scene metaphorically in budgeting terms:
The road or asphalt is life. Hopefully nice and smooth, but likely winding with ups and downs; potholes and debris, though infrequent, are to be expected from time to time.
The lane lines, dots/markers, and rumble strips are our budgets. They guide us along the road, keep us headed in the right direction, and help us avoid danger. Sometimes if we drift beyond the line, only a small correction is needed. Sometimes when you hit that rumble strip, things get loud and uncomfortable. The same goes for our budgets.
The guardrail is your emergency fund. It’s effective at keeping you from going down a cliff, but it’s painful. If you hit it, not only will your car be damaged, but so will the guardrail; both will be in need of repair. Same with our finances. If we need to tap into our emergency funds, it probably means we’ve hit a painful point of life. Once we free ourselves from relying on it, we might have some scrapes and bruises (dinged credit score, perhaps?), and our emergency fund will be low, if not depleted (dipped into that retirement account?), and in need of replenishment. Early in your career you may be young, poor, and driving an econo-box; it won’t take much of a guardrail to keep you from going over. As you progress in a career and get older, maybe you get married and have kids; your guardrail will need to be bigger and beefier to stop that minivan fully-laden with increased financial obligations.
What is the bike lane? I would suggest that this is a buffer you should create by self-imposing constraints on your spending and generally living below your means. It augments the typical emergency fund and is used more for unexpected expenses that pop up here and there and less for the “I just lost my job” emergencies. It may include ‘savings’ you have earmarked for other goals: vacations, car fund, medical funds, etc. If it is narrow or non-existent, you are rightfully going to be white-knuckling that steering wheel and focusing on avoiding the guardrail above all else — not very fun. The wider it is, the safer you are, the less you’ll stress, and the more you can enjoy the beautiful scenery of life. If you have to swerve to avoid a pothole or boulder here and there, you’ve got extra space — no biggie!
Some might wonder where to draw the line between bike lane funds and guardrail/emergency funds or how distinct that line should be. It is going to be different for everyone and their unique circumstances. Regardless, you won’t be able to build that buffer or widen your bike lane if you are spending every penny that comes in. Eventually, your lifestyle and budget need to blend to allow you to live on less than what you earn.
What’s so special about paint on the ground or reflective, plastic trapezoids? These simple, man-made items when appropriately placed and properly followed, allow us to safely do and see more. Similarly, we need to find man-made or artificial constraints for our budgets that will allow us the freedom to do more. Here are some I use to maintain or grow my financial “bike lane”:
24 vs. 26 – I get paid every two weeks, and that means 26 pay periods in a year, yet I budget as if I get paid twice a month. That means twice a year I get a little extra. Maybe that money helps me catch up if I’ve overspent, replenishes my emergency fund, pays for a vacation, or whatever. I specifically don’t budget for it, so I can use funds where needed when it comes.
Frugal Months – tighten those screws every once in awhile and get back to basics. It’s sort of like hitting the reset button mid-year, and hopefully it helps you save a few hundred here or there.
Hidden Savings – $200 from every paycheck goes to a separate savings account that isn’t part of my regular budget. Though I know it is there, I’ll go months without thinking about it. It is always nice when I remember it, log in, and see that I’ve got a little extra I haven’t been planning on. Some are against this method, but it works for me.
Beef Up Your Tax Refund – Claiming fewer tax exemptions will cause you to take home less each pay period, but it will result in you learning to live off less and getting a bigger tax refund.
Get rid of consultants – Over paid, over used, over rated, if you hire the right people, consultants are not needed. An expense for business that can be eliminated.
Alone each one might not result in huge savings, but altogether they result in a meaningful amount for your family or business.
Thanks for coming along for the ride.
COLLEGE CHRONICLES – When it rains it pours, Notre Dame’s bad 2016 continues. The NCAA ordered the University of Notre Dame to vacate all of its football wins from the 2012 and 2013 season after an investigation found a trainer had given players extra benefits and helped two players cheat.
Mr. Trump’s promise to deport millions of immigrants spurred a nationwide push last week to designate colleges as “sanctuary campuses” — zones where officials limit their cooperation with immigration authorities’ deportation efforts. Since then, a few colleges have so designated themselves, including Reed College and Oregon State, Portland State, and Wesleyan Universities. In a letter on Monday, Columbia University made similar promises without using the phrase “sanctuary campus,” and pledged to increase financial aid and support for undocumented students should a change in policy affect their ability to work in the United States.
TOP THREE – Favorite Los Angeles downtown restaurants:
1). Bestia: 2121 E. 7th. Place (Italian)
2). Officine Brera: 1331 E. 6th Street (Italian)
3). 71Above: 633 W. 5th Street (American, seafood)
BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Barbara and Jenna Bush (55); Vin Scully (89) Woodland Hills, CA.; Shannon Sisk …famous teacher; Ben Stein (72) Malibu, CA.
PERRY MASON - California's legal system beset by scandal, conflict: The State Bar, an agency that licenses and oversees hundreds of thousands of California attorneys, has been wracked by financial irregularities and allegations that it has neglected to protect us from unethical or incompetent lawyers. State Auditor Elaine Howle has detailed its financial problems, legislative hearings have added to the drumbeat and Elizabeth Parker, who was brought aboard as executive director to clean up the mess, calls it 'an organization in turmoil.
BEWARE iPHONE USERS - How a grad student found spyware that could control anybody's iPhone from anywhere in the world: By nightfall, the two engineers were staring in disbelief. 'This can spy on audio, e-mail, text messages . . . everything. Someone spent a lot of time creating this.” Engineers thought it the most beautiful code they had ever seen. 'There's never been anything like this before," he said.'"
EXTRA CREDIT - China’s newest tool for social control is a credit rating for everything. Beijing wants to give every citizen a score based on behavior such as spending habits, turnstile violations and filial piety, which can blacklist citizens from loans, jobs, air travel. Hangzhou’s local government is piloting the “social credit” system the Communist Party has said it wants to roll out nationwide by 2020, a digital reboot of the methods of social control the regime uses to avert threats to its legitimacy. More than three dozen local governments across China are beginning to compile digital records of social and financial behavior to rate creditworthiness. The endeavor reinforces President Xi Jinping’s campaign to tighten his grip on the country and dictate morality at a time of economic uncertainty that threatens to undermine the party.
WHITE HOUSE NORTH – New York Times is calling Trump Tower "White House North" in a cool feature online. http://nyti.ms/2fH7Ydb
GIVE ME PATIENCE - I guess today is not the day I’ll stop feeling sick to my stomach: “In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally.” Donald J. Trump, 45th President Elect United States of America
JACK ASS OF THE MONTH - Please! Will someone explain to me why, in today's culture after every disagreement involving the public arena of "major" events, people either have to engage in fisticuffs in a back alley, or maliciously destroy others' property or go into cardiac arrest or experience a brain malfunction requiring "counseling"?... Or experience all of the above simultaneously?
Has the human psyche gone completely haywire?
To put it another way: Are some members of the human species walking around with what I call too many "birds on their antenna"?
People whine about virtually everything these days if it doesn't fit in with their self-centered thought process.
Many in our country are still feuding and fighting over the results of the presidential election. From all indications, it will continue for months, even years.
And now comes the aftermath of "The Game" — Ohio State vs. Michigan.
But, I gotta tell you, sports fans, my Maize & Blue flag is at half-mast today. However, it's not for the reasons you think.
No. It's not because my favorite team lost to the Buckeyes, 30-27, in double overtime, in a thrilling college football game.
No. It's not because, like many diehard Go Blue! fans, I went berserk over the officiating.
No. It's not because the Ohio meteorologist rigged the weather in favor of Brutus Buckeye.
Here's the truth. Believe it or not, I am ashamed of and disappointed in the behavior of "the leader of the pack". His name is Jim Harbaugh, and as the football coach at the University of Michigan who earns $7 million a year, plus generous perks, he is expected to behave like a "Michigan Man". In other words, he should serve as a role model for his players as well as the rest of the student body and Wolverines fans everywhere, including this old U of M devotee from "Up North".
The coach was a planet away from being a role model after Saturday's game. He went into a "kill the ref" mode, spending his entire post-game press conference ranting and raving about how his team was robbed by the on-the-field officials.
He couldn't have cared less that it was a hard-fought game where players left everything on the field. Perish the thought he would praise his team for giving 100 percent in spite of the heartbreaking defeat.
No! His comments were aimed solely at the officiating crew.
Harbaugh himself was called for "unsportsmanlike conduct" during the heat of battle after he threw his headphones and script to the turf. His antics resulted in a 15-yard penalty. Ohio State scored a touchdown on the very next play.
My final analysis: His team played its heart out.
His final words: "I am bitter!"
My final advice: "Get over it, Coach!" Welcome to the Jack Ass of the Month Club.
NHL AT THE QUARTER POLE - For decades it has been observed that teams out of the playoffs on Thanksgiving Day usually begin golfing and fishing in early April, when their better peers prepare for the first round. Approaching an important juncture of the season, it is clear I might well have been wrong.
There certainly is no evidence of season-to-season improvement at the quarter pole. In fact, quite to the contrary. If not for Jimmy Howard’s marvelous play, in a few games in particular, the Detroit Red Wings might well be in the basement of the Eastern Conference, a few points below the Islanders. Right now, this is a below average offensive team and a below average defensive team.
NHL POWER RANKINGS:
1). Chicago Blackhawks (14-6-3)
2). Montreal Canadiens (16-4-2)
3). New York Rangers (15-7-1)
4). Pittsburgh Penguins (13-6-3)
5). St. Louis Blues (12-7-3)
NFL GAME OF THE WEEK – Thursday 12/1, 5:25 PM PT, NBC: A good Thursday Night football game for a change, Dallas Cowboys (10-1) at Minnesota Vikings (6-5). Vikes are due for a big win in prime time, 28 – 24. Season to date (10-2)
COLLEGE FOOTBALL PICK OF THE WEEK – Saturday 12/13, 5:00 PM PT, Fox; A ho hum Big Ten Championship game, #6 Wisconsin Badgers (10-2) vs. #7 Penn State Nittany Lions (10-2). We like the Badgers 30 – 20. Season to date (10-3)
SMALL COLLEGE FOOTBALL PICK OF THE WEEK – Saturday 12/13, 12:00 PM ET, HGTV: The D-III Quarterfinals: #7 Mt. Union Purple Raiders (11-1) at #14 Alfred Saxons (13-0), the Saxon Warriors continue their spectacular season, 21 – 20. Season to date (8-5)
COLLEGE HOCKEY PICK OF THE WEEK – Saturday 12/3, 7:30 PM ET, CBS: An inter-conference matchup at Madison Square Garden in New York, pregame cocktails at Trump Tower. #3 Boston College Eagles (11-4-1) vs. #9 North Dakota Fighting Hawks (7-5-3), Eagles win at The Garden, 5 – 3. Season to date (3-5)
THE SWAMI’S WEEK TOP PICKS –
(NFL, Dec, 4) Buffalo Bills (6-5) at Oakland Raiders (9-2), Bills are playing good ball, but the Raiders are destined. Raiders win 30 – 20.
(NCAA FBS, Dec. 3) #10 Oklahoma St. Cowboys (9-2) at #8 Oklahoma Sooners (9-2), the Big 12 title game, Kathy Vance’s Sooners win 40 – 35.
(NBA, Dec, 3) Atlanta Hawks (10-8) at Toronto Raptors (11-6), Raptors 105 – 95.
(NHL, Dec. 3) Montreal Canadiens (16-4-2) at Los Angeles Kings (12-9-1), Kings beginning to play better, win 4 – 2.
Season to date (109 - 92)
MARKET WEEK - Wells Fargo (WFC) is facing more legal problems, with employees accusing Wells in a lawsuit of steering more than $3 billion into expensive funds run by the bank, which have underperformed.
AT&T (T) is unveiling today a new over-the-top streaming service called DirecTV Now, offering more than 100 live streaming television channels at $35 per month.
Embattled Samsung plans to disclose a strategy to boost shareholder value tomorrow. The moves comes as Elliott Management pressures the company to split and provide more in payouts.
Elon Musk's SpaceX is expected to soon give federal officials a preliminary report, pinpointing fueling procedures as the most likely cause of a September unmanned rocket explosion.
YunOS, developed by Alibaba (BABA), was on track to pull ahead of Apple's (AAPL) iOS, as China's second-largest smartphone operating system, making inroads against No. 1 Android, made by Alphabet's Google (GOOGL).
Walt Disney's (DIS) "Moana" topped the five-day Thanksgiving holiday weekend box office with $81.1 million in North American ticket sales. Falling to second was J.K. Rowling's "Fantastic Beasts."
The winning ticket for Saturday night's Powerball grand prize of nearly $421 million was sold in Lafayette, a city of about 5,000 residents, about 60 miles northeast of Nashville, Tennessee (damn).
STOCKS TO WATCH - Auto parts maker Delphi (DLPH) and Israel's Mobileye (MBLY) are putting an Intel (INTC) chip at the heart of their joint effort to produce self-driving vehicles by 2019.
TiVo (TIVO) signed a licensing deal with Netflix (NFLX), which calls for TiVo to continue integrating Netflix into its set-top boxes, and provides Netflix a license to TiVo's patent portfolio.
Allstate (ALL) announced a deal to buy third-party warranty provider SquareTrade from private investors that include private equity firm Bain Capital for about $1.4 billion. The insurer expects to close the deal in January.
Royal Dutch Shell (RDSA) is considering a sale of its oil fields in Iraq, as part of a $30 billion asset disposal program.
DRIVING THE WEEK - Congress is back in town with a CR to keep the government running the top priority. Our friends at Playbook say Congress is likely to kick the fiscal can into March and skip town for the holidays by the end of next week ... Still waiting on a Trump Treasury pick ... Second estimate of Q3 GDP on Tuesday excepted to be revised up to 3.0 percent from 2.9 percent ... Case-Shiller Home Prices home prices at 9:00 a.m. Tuesday expected to rise 0.4 percent ... Consumer confidence at 10:00 a.m. Tuesday expected to rise to 101.3 from 98.6 ... November jobs report on Friday at 8:30 a.m. expected to show a gain of 175K and no change to 4.9 percent jobless rate.
Next week: Words of the Month.
Until Next Time, Adios.
November 29, 2016
CARTOON OF THE WEEK – Zits