Give Me Get Me Buy Me is the title of Donna Corwin’s recent book. Subtitled Preventing or Reversing Entitlement in Your Child’s Attitude, it proved itself to be an interesting read. I’ll first offer the mandated FTC disclosure, I received a copy of the book in exchange for this review through the kind people at TLC book tours. I am the father of an 11 year old girl and when I read the description, I felt this book fit within my personal goals as well as the scope of my blog.

On one hand, this book is brief, 9 chapters over 180 pages in a trade paperback. On the other hand, the author wastes no time tackling the issue at hand, keeping the anecdotes short, as a way of illustrating a given scenario, and offering a path to solving the particular behavioral issue being addressed.

The first  chapter discusses the external pressures which begin innocently enough but result in our creating the sense of entitlement in our children. We want ‘the best’ for our children, don’t we? Once we get beyond the safety issues (yes, the stroller and crib need to be sturdy and safe) we move toward the designer realm and once the train has left that station, we don’t know how to stop. One only need to Google “designer diaper bags“  to understand this point. There is a combination of pressure from the media and from our peers to focus on possessions and to strive for bigger and better status symbols. Advertisers have made an art of convincing us that we need and in fact, deserve, the latest gizmo, larger, flatter TV, bigger house, etc. Our children have become aware of the cars their friends’ parents drive, the size of their houses, the vacations they take. All of this lends itself to a ‘keeping up with the Joneses’ for both parent and child. When this is identified and understood, we can begin to address it.

We move along to better understand how our own views on money, possessions, and instant gratification originated and are passed down to our children. Maybe when we grew up we didn’t have all the things we wanted and are now overcompensating by trying to not have our children want for anything. Perhaps we were spoiled, and having everything handed to us, continue that mentality for the next generation. The author makes no claim to any background in psychology, but from reading this book, this section especially, her understanding of human nature really come through.

Through the rest of the book, the author offers practical, concrete advice to move our child away from the ‘give me’ attitude to one that’s less selfish, less entitled. For the younger child, she suggests a point system, rewarding positive behaviors and actions, while removing points for improper behavior.  For older children, strategies include regular family meetings to keep the dialog going and to set expectations. I was pleased to find an abundance of advice that I plan to adopt in my own attempts at being a better father.

One suggestion I’d offer, perhaps one which the author took for granted, is that unless you are a single parent, both parents need to read this book, together if possible. Any suggestions you’d implement to induce change within the family dynamic should really be a two parent effort. If for no other reason, children should see their parents on the same page for the major issues. It would be quite the failure in communication if the child discovers that mom is the strict “we can’t afford that” parent, yet dad pulls his wallet out at every request (or vice versa). My next step is to leave my copy on my wife’s night table and encourage her to discuss it with me chapter by chapter.

Giveaway: The publisher has offered to share a free copy with my readers. I will hold a random drawing of those who offer a comment to this post. The drawing will be held the weekend of March 27-28. Good luck.

Joe

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written by JOE \\ tags: book review, child rearing, entitlement, family

With so many people in the world, it should come as no surprise when an author writes a book on a topic that I’ve been thinking about for some time. It started with a scene in the 1984 Robin Williams film Moscow on the Hudson where he’s in a supermarket and is overwhelmed by the choices of coffee available for purchase. Fortunately, I’ve never passed out in the coffee aisle, but over the years I’ve felt myself a bit paralyzed by the shear number of choices that we have to make on a daily basis, the supermarket among them.

I took this photo a few months back with the thought of writing about this, and then came across The Paradox of Choice by Barry Schwartz which made for an interesting read. The author who I suspect is a bit older than I am (I’m bad at looking at a picture and guessing one’s age, I am 47 by the way) starts with an anecdote about the purchase of a pair of blue jeans. He knows he’s a 32×28 (waist/inseam) but is bombarded with choices, slim fit, easy fit, relaxed, baggy, or extra baggy. Does he like stonewashed, acid washed, or distressed? Zipper or button fly? When I was a teen, I frequented a jeans store that hemmed for $2. So to get it just right, I’d buy the correct waist, but on the long side, wear them and wash them a few times, then go back for my $2 hemming. Barry remarks that what should have been a simple purchase somehow turned into nearly a day long process.

In this country a lack of choice would be unimaginable, yet the number of choices we have with nearly every purchase we make is not liberating but debilitating. We are offered examples of studies that confirmed the phenomenon of too many choices. In a number of different settings, potential customers are offered a few choices of a sample food item, and others, over a dozen. In every case, those offered fewer choices, made a decision and more frequently a purchase than the group that was overwhelmed with items.

I think that Costco hit the jackpot by recognizing this years ago. On my last visit to Costco I found myself chatting with another customer about how cheap the huge shrimp were, and the store manager happened to be within earshot. I asked him if he had heard of this book (he hadn’t) and told he that I now understood Costco’s success. It was the lack of too many choices. Almost no items are available in different sizes, except of course for clothing, and most items aren’t offered by more than 2 or three brands. This fills one’s cart with little in the way of time wasting decisions.

Further along in the book we are introduced to the concept of Maximizer vs Satisficer. The first group tends to try to make sure that every purchase decision is absolutely the best, or as near to the best as possible. The second group, however, will choose something that’s good enough and live with that decision. In my own life, I tend toward being a satisficer. When in my early 40’s, I had the unique situation of buying my first car (having had company issued cars ever since graduating college) I made a very fast decision. It so happened that my best friend and two of my coworkers all had the same make and model car. I asked their opinions and all three were happy with their choice. So, I made the decision to go with that car and spared myself the time and anxiety I hear so many people endure on a car purchase. A few hours on line and I was able to get an idea of dealer cost vs MSRP, to go in and just buy the car.

To be totally honest here, there were times and may still be the occasional time when I tend toward maximizing. In high school I scored a 770 on the math SATs (for those who do not know, this is an exam graded on a scale off 200-800 required by most colleges as part of the admission process) and was very upset not to have a perfect score. My classmates actually sympathized knowing that this was my goal and consoled me, even though it was the highest score in my year. Of course I studied more, actually ‘drilled’ is the right word as I prepped to take it again. The second time I aced it, got the 800.

Years ago, the company I worked for had 4 fund choices, Bond fund, Balanced, Large Cap, company Stock. Of course those choices don’t seem adequate, and the employees spoke out. Three years after bumping the choices to 12, 95% of the total plan value remained in the original 4 funds, and participation in the 401(k) actually fell instead of rising. This situation is repeated in the book as yet another example of more choice really not helping the consumer, only confusing them.

I hope you enjoyed this discussion. It wasn’t a random book I chose to read, as the topic itself had haunted me for years, and I had planned to share my thought on this topic before I was made aware of the book. I enjoyed this book and recommend it if you find the idea interesting.

Joe

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written by JOE \\ tags: book review, choices, decisions, paradox of choice, shopping

I recently read Your Money Ratios, 8 Simple Tools for Financial Security, by Charles Farrell.

The Disclaimer
I was asked to review this book in exchange for a copy, and chance to give a copy to one of my readers. This didn’t influence my thoughts on this book which are genuine and my own. I did however pick up this book with a bias. Charlie Farrell wrote an article on CBS Market Watch titled Don’t Rush Into Roth IRA Conversions. With all of the cheerleading surrounding the Roth IRA, this article echoed the warning that I’ve written about myself. I consider it serendipity to have read this article shortly before I began reading Your Money Ratios.

The Ratios
Capital to Income – Very simply, your current saved assets compared to your current annual income
Savings Ratio – The percent of your income you need to save each year
Mortgage to Income Ratio – How large your mortgage is compared to income
Education Debt – Amount owed compared to income
Investments – percent ratio of stocks and bonds
Disability Insurance – The monthly income you’d get as a percentage of current income
Life insurance – The number of years salary of the policy
Long Term Care Insurance – Insurance for this care, kicking in at age 55

Financial authors run a risk, too much detail and a reader will lose interest, too little, and the message may not get across. In this case, I think Charles Farrell did an excellent job straddling that line, staying on point, and keeping my attention throughout the book. To be honest, he had me at “when it comes to your money, and your future, you want to be Mr. Spock, not James T. Kirk.”

Charles offers a step by step process, so the reader isn’t left on his own to fill in the blanks. Starting with an 80% of income replacement target (where did that come from? Well, if you’re saving 12% and another 7.65% goes to payroll witholdings, you’re living on 80% now) we are walked through the percent of income to save at different ages and how to invest this savings in order to reach the target. I’d point out that the assumption is for Social Security to provide 20% of one’s working income. If you object, thinking this is too high, my Social Security Benefits post from last May should put your mind at ease. The benefit is regressive so a $90K earner may get $27K/yr (30%) but a $50K earner will get nearly $21K (42%) so Charles’ numbers are actually conservative.

Frequent reference is made to his Unifying Theory of Personal Finance:
“All decisions you make should help move you from being a laborer to being a capitalist”

This is not a poke at people who work with their hands. It’s an encouragement to save enough wealth so your money’s return has a significant impact. Consider, the first few years of savings, the interest or growth on your account doesn’t feel like much. But once your savings are equal to a year’s pay, a 10% increase is nearly as much as the 12% you add to the account, and it’s grown by 22% in that year.

I think that this book would benefit people at any stage of their life (hmm, maybe the blurb on the cover stating “for every stage of life” really sunk in). Someone just starting out can get a good understanding of how to start on a good financial path, knowing in their 20’s what their goal is 30 some years hence. An older reader can get an understanding of whether or not they’re on target and perhaps better calculate what their goals are. More than anything, the writing style and tone of the book was something that put me at ease. We are offered targets but not made to fell that these number are rigid, carved in stone. Even the replace ratios are offered as targets, 80% at age 65, but a fallback position of 70% at age 65 or 70 is also discussed if one either can’t reach the 80%/65 or doesn’t need that sum.

There is also an invitation to go to Your Money Ratios website and check out how you rate, your Money Mass Index.

I’d do a disservice to not be clear about what you won’t find in this book. The investing method is simple, a mix of stocks and bonds with a brief reference to diversifying with international stocks. Some might object that this section might have been expanded upon. For a comprehensive overview of asset, I’d suggest a book such as William Bernstein’s The Intelligent Asset Allocator. From a practical standpoint, the mix of stocks and bonds suggested will have a far greater impact than the further diversification within the groups is likely to provide. In the end, an enjoyable and educational read.

The Giveaway
To help promote the book, the publisher has offered me a copy to give away to one lucky reader. If you wish to be entered for the drawing please sign up for my RSS email subscription and I will chose a winner on January 31. Yes, you can unsubscribe after the drawing, but you wouldn’t want to, right? (Note – this giveaway is valid only for my readers in the US and Canada, they cannot ship elsewhere.) Good luck!

Joe

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written by JOE \\ tags: book review, Finance, Retirement

How To Make a Fortune From the Biggest Bailout in U.S. History is former CNBC anchor Ron Insana’s latest book. Its subtitle A Guide to the 7 Greatest Bargains from Main Street to Wall Street offers a glimpse into the book’s intent, how one can identify and profit from, recent events in the financial markets.

Ron (forgive my lack of formality, but as someone I’ve seen on TV for 25 years, ‘Mr. Insana’ seems a bit too formal) first offers a bit of historical perspective, discussing how there are times post-crash when the markets are on sale, at bargain basement prices. “Imagine buying the 1932 Dow at 1896 prices.” Indeed, today’s stock market as measured by the S&P is where it was in early 1998. Click on the chart if you wish to enlarge it.

In a twenty first century variation of “follow the money,” we have examples of how the pros have been navigating recent events and coming out winners, big time. Sam Zell, real estate magnate, sold all of his commercial properties to Blackstone for $39 billion in 2007, just as the market was about to take its turn. Bill Gross, founder and CEO of PIMCO, has been able to achieve returns in the bond market that have managed to exceed the long term stock market returns. His advice now is to put your money where Uncle Sam does. With the ability to adopt a ‘too big to fail’ approach, the government is able to prop up and bring to health the institutions they choose. Warren Buffet, with some very high profile (e.g. Goldman Sachs) purchases during the latter part of 2008 was a bit ahead of the market bottom, to be sure, but is now profiting handsomely from his investments.

While the book is upbeat about the future for the economy moving forward, Ron does share the concerns he has which could either slow or stall such a recovery. Among these concerns are the ballooning deficit nearly two trillion dollars this year and projected to exceed one trillion dollars in 2010. The flip side of this is that all of this stimulus will still not be enough to boost the economy back to health.  Energy costs are also a wild card as a jump in gas and heating oil can quickly tap the brakes on an otherwise accelerating economy. Last, there are still concerns regarding the politically unstable regions of the world, North Korea, Iran, and Afghanistan among them.

Through the book we are offered examples of the government’s efforts to keep the recession from worsening, and how this will impact different segments of the economy. This, combined with very large cash holdings as compared to the value stocks, sets the stage for a continued recovery in the stock market.

Specific to stocks, the market is not homogeneous, the declines have hit some sectors far worse than others. Among the sectors that have hit badly are financials, home builders, and technology. Instead of choosing individual companies, Ron suggests using ETF (exchange traded funds) or mutual funds to lower the risk involved. For these industries just mentioned, XLF is the symbol for the S&P select Financial Sector, XLK for Techs, ITB for iShares Dow Jones US Home Construction. (Note: I offer these as a starting point for you to do your own research, the book does not specifically mention these, and I offer them only as examples of what is suggested.) Choose one company in any industry and there’s a risk that for whatever reason, that company fails. By using ETFs, you reduce that risk, as the chance of an entire industry failing is unlikely.

Next, Ron discusses REITs, Real Estate Investment Trusts. These investments trade like a stock, but are invested in Real Estate, focusing on residential, commercial or in the case of Mortgage REITs, the mortgages on these properties. A case is made for the fact that once the economy begins to recover, REITs’ returns will (likely) surpass the market averages for superior returns. Just as Real Estate was in the midst of a bubble two years ago, we are now experiencing a period of over shooting on the downside. For those who are considering purchasing a home for their own occupancy or as a rental property, these same factors make it a favorable time to do the research and move on the decision.

From stocks, let’s now move on to bonds. Bonds were not immune to the financial crisis, in fact, they were at the very center of it. That said, there was still  the same overselling going on in the bond market that occurred in both stocks and real estate. Ron specifically makes a case for municipal bonds citing the fact that no state has gone bankrupt in the history of the US. He warns to stick to General Obligation bonds as opposed to project specific, given that the General Obligation maintain a senior position.

In closing, let me say this – This is not a book to buy and put on your bookshelf to read some day. The opportunities spelled out in its pages are not going to be around for ever. Given the timing between the editing process and getting a book to the stores, some of the potential gains have already occurred. As with any investment, make sure you understand the risks involved. I have no doubt that there will be people who read this book and profit handsomely, as well as those who think they are following the book’s advice yet somehow misapply the lessons learned. My own disclaimer – FTC regulation require that I disclose I received a review copy of this book as compensation in full for providing a review. This did not impact the content of this post in any way.

Please let me know what you think of this book after you read it.

Joe

Update – I was fortunate to catch an interview with Ron on CNBC discussing his book you can watch the video I loaded on You Tube)

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written by JOE \\ tags: book review, Finance, ron insana

The book Start Over Finish Rich by David Back, is now available (one day only) as a free ebook download at WalletPop. Note: this is not a pirated copy, I received a mailing from David today announcing this promotion. A good way to start a Monday.

This was good for the one day, I’ve removed the link, hope you enjoyed the free eBook!

Joe

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written by JOE \\ tags: Book, free, free eBook

I recently read Trade-Off, Why Some Things Catch On and Others Don’t, by Kevin Maney.

This book surrounds one premise, that for a product to succeed against its competitors, it needs to excel in either Quality (fidelity) or Convenience. In a montage of one example after the next we are given pairs of products as examples of this concept. The fidelity (literally) of MP3 audio is lower that that of a CD, but the convenience is much higher, a dollar or so (assuming you’re not stealing it) and a few seconds download time, and it’s yours. A CD, at best, is a walk or car ride away, or a few days if ordered on line.

The author goes on to discuss how where a product lies on the fidelity/convenience curve will shift over time. Not just to say that it can shift, but that it will. A simple case in point, the iPod. The first models came on the scene as a high priced, high fidelity purchase. Over time, the iTunes store took off but the unique aura surrounding the iPod faded a bit as everyone seemed to have one. As the iPod shifted its position on the curve, Apple introduced the iPhone and gained incredible market acceptance for this new product, again hitting the high point on the fidelity curve as its older products shifted toward convenience.

This book is fast reading, and enjoyable despite its tight focus. Take a read and see if you don’t start to view certain products in a different light.

FTC disclosure – The copy of this book I read was from my public library. No one paid me to read it or write about it. Most links in the sidebars left or right are advertisements, and not personal endorsements.

Joe

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written by JOE \\ tags: Book, Business, marketing