Ace Wisdom

Would you believe that I had my information half typed and I pressed a button accidently and lost it all. Margaret warned me things like that could happen.
I decided I was entitled to be whimsical today. I will tie it into finance somehow.
Just a few comments on Valentines Day. There is no financial consideration of the Day. You don’t want to do something stupid! Valentine’s Day is not about controlling the spigot, watching cash flow or worrying about long term goals. It fails Paul’s “want versus need” analysis. It is about emotion. It is an investment in harmony and the heart. So on this one day, you can loosen up and do what is necessary to tell the special person in your life that you love them and spend a few bucks. It is an investment in the human spirit. I hope you invested wisely.
Okay. Okay. I gave my valentine some flowers and cost was no object. I heeded my own advice. Then I signed the card “with love to the special person in my life”. Then my valentine gave me a very nice card and she signed it “with love to the special person in my life”. Call it coincidence. Call if spiritual. Spooky!
I was walking this morning as always and I noticed that they are now changing the display windows since Valentines Day is over. I walked by Victoria’s Secret and they have a whole new Campaign. Yep. One-half off. The question is, “which half is left off”. Is there enough to leave off. By the way, what is Victoria’s real secret? I wouldn’t say apparel from Victorias is a “need” unless it is Valentines Day. Then it could be a “want”.
Sunday night was snow. I didn’t shovel because I’m a bright guy. I watched the weather station and we were going to have warmer weather and sunshine. It didn’t happen. So my neightbors have to trudge through the snow. I guess I could shovel, but the sun is still forecast. No sense spending a lot of energy if not required. I could hire someone to shovel but my spigot is stuck.
This is the week of the Sports Illustrated Swimsuit Issue. Is the one special issue worth $89.50 subscription per year. I think this investment falls into the category of “want” not “need”.
Enough nonsense. I don’t know how much you learned, but I feel better.
Go forth and continue your financial vigilance.
Love,
Dad (Just Chas.)

My inspiration for “pouring cash” comes from Nana’s 94th birthday dinner at St.Anna with Bob and Mary, Chuck and Shelby and of course, the guest of honor. I hope when I’m 94 that I crave steak and cake. It was very enjoyable.
I’ve talked about filling your cask with cash. The goal is to maximize the amount of cash poured into the cask and manage spending by controlling the spigot at the bottom. There are a lot of ways to pour cash into your cask and you do it every day. Debs manages a Wisconsin Vision Outlet and makes big bucks, Kelly practices chiropractic for a Health Organization and her own business, Chris makes tons of money telling other people what to do and Margaret is highly paid to develop computer solutions. And for Paul the journey is just beginning.
The dream of starting your own business should conjure up visions of sugar plums in you heads. Steven Jobs at Apple, Bill Gates at Microsoft, and Michael Dell of Dell Computers all followed the dream and are rich beyond comprehension. Money pours into their cask. Hell they probably can’t find enough casks. There is probably money all over the floor. I don’t think they worry about spigot expense control.
Mary Steger got me thinking with her comment that “anyone who starts their own business ought to have their head examined”. She is aware of all the difficulties facing a business and how fragile it really is. However there is the other side. For someone who believes in an idea, is willing to take financial risk and will work tirelessly to make a business succeed, there can be a huge payoff. It is the American way.
87% of all businesses employ under 50 people. They are small. George and Lyla started a business that is headed for third generation ownership. My Grampa Chalk and Myrna bought the City Club in 1922 and it remained in the family for over 60 years. Kelly started her own Chiropractic practice. David Steger has started his own computer related business (he didn’t listen to his mom). Actually your mom started her Shaklee Distributorship but money was secondary to the benefits of the products.
“Pouring cash” comes from the multiple ways your own business can pay off. You usually can draw a salary. Assuming you are profitable, you can pull money out at the end of the year as a dividend or partnership distribution. As the business grows, more cash can follow growth and you can drive a company Porsche (there is my dream car again). The ultimate payoff can come from selling your business at middle age for an obscene profit, wiring the proceeds to an account in the Cayman Islands and then sucking Mint Juleps for the rest of your life on a south sea island.
The entrepreneurial mind doesn’t see roadblocks. Only opportunity. They don’t know 9 out 10 new business ventures fail. They don’t see the problem in raising money to start a venture. They will find cash some-place. There is a passion to build something. They usually are not familiar with the word “no”.
So if there is passion within you to build something, call Bob and Mary for fiancial support. My cask doesn’t have venture capital in it to chase some wild ass venture.
Love
Dad (Just Chas.)

First, one of the Grasshoppers turned 41 on Feb.7. Happy Birthday! I know it was a festive occasion. The cake was delicious.
Second, I need to clean up some errors and misconceptions about my last writing on “Paychecks!”. I mis-spelled Porsche. I can’t believe that I could make such a mistake. I left out the “c”. If you are going to have snob appeal, you want to spell Porsche correctly. I also indicated that if you made $1000 per week, the medicare health insurance deduction was 1.65% of the total. Well it is really 1.45%. So instead of a deduction of $16.50 it is only $14.50. A gain of $2.00. I want to be correct. I apparently created some feelings of quiet desperation when I said that the federal tax deduction would be 20% or $200. Because the marginal federal tax bracket up to $58,000 is only 15% and you get to take deductions for those kiddies and mortgages and state tax payments, the deduction from you $1,000 per week would only be around $100 per payday. So Grasshopper No. 5, out of $1,000 you would take home a net of $683.50 instead of the meager $581.50. That should make you feel better.
Now a quick note on taxes. I know most of you do your own federal and state taxes. Most steps are pretty simple. After you calculate the total federal tax for the year, USE THAT NUMBER TO DETERMINE YOUR 2005 DEDUCTION ON YOUR PAYCHECK. For example, if your federal tax obligation this year was $3,000 divide that by 52 weeks and that should be your deduction on your paycheck. That comes to $58.00 per week for those of you with a calculator. Do the same with your state deduction.
I know it feels good to get a large tax refund at the end of the year. From a pure money management standpoint, if you are having too much deducted off each paycheck, you are letting the government use your money for free. That is not good management. I always errored on the side of a SLIGHT REFUND but I would cut it pretty close. I wanted more money in my pocket during the year and I didn’t plan on a big refund.
Another key to getting rich, YOU MANAGE YOUR MONEY, DON’T LET THE GOVENMENT DO IT. Dah!
Love,
Dad (Just Chas.)

In the musical “The Music Man” there is a scene where gossipy old ladies sing “Pick a little, talk a little, cheep cheep cheep”. It serves as a perfect lead in to an analogy for your paycheck (those of you who have one).
When you are employed by someone you receive a paycheck for your services weekly, bi-weekly, semi-monthly or monthly. It is the financial fulfillment of your employment contract. Of course there are many intangibles such as job fullfillment, goal achievement and comradere. Ha. Ha. Ha.
Let’s assume you get $1,000 per week for your services. Here it is okay to have automatic deposit into your checking account on payday. If you are sick or out of town or on vacation, your money is there for you. I use to get my paycheck and cash it on bus on the way home.
Now for my analogy. The government, the bureaucrats, and the company all have plans to reduce your $1,000. They “pick a little, take a little, and chip chip chip” at your money.
First is social security. It is a 6.2% and goes to pay for my retirement. $62. Thank You. I did it for 37 years.
Then there is 1.65% for medicare insurance. $16.50.
Oh yes, you filled out a W-4 for dependents which determines how much Federal Tax is deducted. You have no idea what you were doing! Lets say you have 20% taken off for Federal Tax or $200.
Because you live in Wisconsin, State Tax is required. Another 5%. Good-bye $50.
One of the benefits of working for a business enterprise is that normally you are allowed to participate in the health plan. It is a good benefit but employees need to pay part of the monthly premium. Let’s say $50 per paycheck. Not an unusual amount.
Then there is the opportunity to set aside money into a 401k plan which is not subject to tax but it comes out of your pay and you get it when you are 59.5 years old or retire. Many companies match. Lets say the company matches you dollar for dollar up to 4%. So $40 more is set aside out of your paycheck.
There are life insurance opportunities, medical savings accounts and other potential deductions to ravage your $1,000.
If I calculated correctly, there would be $418.50 deducted from your $1,000. You get in your hand, $581.50. Jesus! It is like a train wreck. The good news is that some of the money went to your retirement through social security and the 401k is your money if you ever leave the company and it was a good investment. You need the medical coverage so it is fair for participation in a group plan.
Then when you take the $581.50 home, some of the money goes for sales tax on essential products and property tax is part of every mortgage payment. Then you have wife and kids needing care. Then the church wants money. And then you dream of the Porshe Cheyenne that you will never own.
Did you notice how nicely the saga of the paycheck fits “pick a little, take a little, chip chip chip”.
Don’t despair. Gets raises. Earn more. Do the 2 income family bit. Eventually you’ll have lots of discretionary money and you can support your parents in their old age.
Love,
Dad (Just Chas.)

First a story from the wilds of Minnesota. Grasshopper No. 5 has been trying to change her billing on cable service from “automatic electronic payment” each month to a regular bill received by mail. She must have anticipated my rant on “never give anyone automatic access to your money”. Well, in November she called to change to manual bill. Guess what? In December they still took electronic payment. I don’t even know the excuse she was given. Then she called again and she was given assurance that it would change. Again in January, it was electronic deduction from her account. She has called again and you have to wait until February to learn that it hasn’t changed. DON’T GIVE PEOPLE AUTOMATIC ACCESS TO YOUR ACCOUNTS. I don’t care how easy it is to do or how many stamps you save.
Now THE HABIT. I’m talking of course about the SAVINGS HABIT. Here is another key to getting rich. Develop a boring, regular, disciplined savings habit. It is a mental determination to steadily set aside money.
Why set aside money? Your refrigerator craps out after 25 years. Car prices have gone up and you need a bigger downpayment. Your insurance rates just increased. You got your December gas bill and you can’t believe how big it is. You need a new furace. You lose your job and you’ve got to eat or make payments on your new Honda. You get the idea.
First, Andrews rule is to try to save a minimum of 5% of “after tax” income. Suppose you earn $1,500 every two weeks. Most financial people tell you that should set aside 10% of “pre-tax” income. I’ve always disliked 10% of pre-tax because those aren’t dollars I can touch. What I can touch is my “take home pay” or after tax dollars. $1,500 pre-tax translates to $1,150 after tax. 5% of after tax is $57.50 per payday and at 26 times per year, you’ll save the minimum of $1,495.00 per year. You can buy a lot with $1495. If you could save 10% of after tax income you have $2,990 per year.
My personal habit was to open a savings account at a separate bank or credit union and on each payday actually drive to the institution and make a savings deposit. Notice the word habit again. I liked seeing my new balance with each deposit and I earned interest on top of it. By driving to the institution, I was making a conscious statement to myself.
With this habit, you are filling the cask steadily. You aren’t depending on any sign from heaven. We’ll figure out what to do with the money as it builds up to a significant amount later.
Then, don’t touch your savings unless it is an emergency. An emergency is not new DVD’s, an extra Xmas gift or a trip to the mall. An emergency is an expense that your regular paycheck doesn’t cover. To use Paul’s rule, don’t use it for a “want”, only a “need”. And if you are going to withdraw from savings, drive to the savings institution and make a conscious withdrawal. Hopefully, it is painful.
Knowing your cask is steadily filling can be fun and satisfying. It also means you are spending less than you earn. Dah!
Make sure you develop a your annoying HABIT!
Love,
Dad (Just Chas.)

No grashoppers, conundrum is not about practicing safe sex. It is a word that describes the confusion that many have discerning the difference between CASH FLOW and NET WORTH.
I described cash and it’s nature last time. Now it is on to NET WORTH. It is the most important concept I will discuss on this blog. As all of you toil to become rich, the measure of that WEALTH is financially described as NET WORTH.
Net Worth is the concept of taking everything that belongs to you and putting it on a pile. Then you reduce the pile by the amount that you owe to other people. Anything that is left is NET WORTH. That is different than cash. For example, you could be making $100,000 per year but have so many debts that the income won’t cover all the payments. Cash flow is very good. Net Worth stinks.
The assets that you put on your pile are money in savings accounts, equity in insurance policies, 401k plans at work and your first born. Just kidding about the first born. The only way a first born would be important to net worth is if they promise to support you in your old age. Even your car. Actually you put your house on the pile at market value. Say it is worth $100,000 and you only owe $50,000, that asset actually contributes $50,000 to you wealth or NET WORTH.
Everybody should sit down and list all your assets. Then you should list everything you owe. Then close your eyes and pray. Do you have a positive NET WORTH? You can see that cash is only one component of net worth and the only cash that really counts is money you don’t need to live on. Do it. Calculate your net worth. If you need help, let me know. This is another key to your getting rich. Always know your net worth.
Some people calculate the net worth annually. Some do it monthly. Some are so sophiscated that the numbers are updated daily for things such as stocks, bonds, and retirement programs. Being anal retentive, I check it weekly.
Your assignment if you should accept the challenge, is to calculate your NET WORTH. It is the most important term in finance. Hopefully you are worth something. Notice the clever play on words.
Love,
Dad (Just Chas.)

Before I begin my ramblings on “cash”, I need to share Jane Bryant Quinn’s (she is a financial author) observation on controlling the spigot on your cask. There are only 3 reasons NOT TO CONTROL YOUR SPIGOT:
1. You are so rich you can buy anything you want and you still have plenty of money left over in your cask.
2. She forgot the other two reasons.
Cash has always been a dilemma for me. The only cash that ever seemed real was the dollar bills I carried in my pocket. I could buy a dairy queen, pay for my golf, go out to lunch and even buy a Starbucks coffee whenever I wanted. You get the idea. It is a low level of power in a sense because it was my money and I could do what-ever I wanted with it. I could touch it, feel it, and count it.
Cash is also available from a savings account. Somehow that was never the same as the cash in my pocket but it is cash never the less. I guess in my mind, savings meant is was set aside for future uses. Like down payments on houses, boats and cars. Like tuition for Catholic private school systems. Like weddings and graduations. Like repair of my cars when someone backs into them in my own backyard. Never the less, I could get in my car, go to the local credit union and withdraw savings anytime I wanted. It is cash, but different.
Cash is good. Cash is power. Terry Kohler’s dad had several rules concerning money and one was “never snear at cash” meaning if someone pays you in cash, take it.
The textbook definition of cash is that it is money in coin or bills. My defintion of cash is anything you can get you hands on in several days. My list for cash:
1. Cash in bills or coin
2. Checking account – can be converted to cash immediately
3. ATM – Withdraw anytime
4. Money Market Funds – always get check writing privleges and these
funds pay interest.
5. Debit Cards – Immediate deduct from your checking account.
6. Credit Cards – They buy things now like cash, but you don’t have
to pay until later. Dangerous cash!
7. Savings Accounts. Go ahead. Drive down to the bank, credit union
or Savings and loan and make a withdrawal. Or transfer to
checking electronically.
8. Instruments that are the same as cash. Stocks for example can be
sold with a telephone call and deposited in your checking
account in 3 days. To me that is the same as cash but there is a
time delay.
Your mother defined cash as green paper that you can touch and crinkle and has power. And you thought she didn’t understand cash.
Don’t confuse cash with wealth. Wealth or Net Worth is the subject of another musing. For example, you could have $1,000 in you pocket and think you were flush. At the same time you are past due on your mortgage payment of $1,000 so in essense you are worth nothing but can touch and feel the $1,000. There is no power in that! Paul would say that is an unrealistic example because who could ever get $1000 in their pocket? Ha.
Your paychecks are new cash into your “cask system”. The money already lying around in your cask is “old cash”.
Cash is good. It creates good feelings. It gives you the power to buy things. Get as much of it as you can. Here is another key to getting rich. FILL YOUR CASKS WITH CASH.
Love,
Dad (Just Chas.)