TodayForward

Notable Quote: Mark Twain on Stock Investing in October

As we enter October, a month that has delivered much misery to Wall Street over the years, we thought we'd give you perhaps the greatest quote describing the stock market this time of year. We take our hats off to Mark Twain for his delightful insights to the tumult of this notorious month.

    "October: This is one of the particularly dangerous months to invest in stocks. Other dangerous months are July, January, September, April, November, May, March, June, December, August and February."
- Mark Twain

Yes, Mr. Twain, we think you've hit the nail on the head!

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Save Hundreds Annually with a Junk Email Account

Spam assaulting your inbox is bad.  Advertising that motivates you to make unnecessary purchases is even worse.  So why would we want you to open yourself up to thousands of email that are, for all intents and purposes, spam?  Easy, it will save you hundreds of dollars annually.

Not Your 'Real' Inbox

A junk email account is the best way to keep your 'real' inbox clean, healthy, and functional.  By creating an email account that is used exclusively as a spam collector, you'll be able to stay spam free with the email you use on a regular basis.  In addition, since it's outside of your regular mail account, you won't be checking it regularly - helping to keep a lid on unnecessary expenses.

Setting Up Your Junk Mail

If you use gmail, go to Yahoo!; if you have Hotmail, look into gmail.  The bottom line is you want to setup your junk mail account with another service provider altogether so you can segregate the good from the bad.  In addition, if you use Outlook or another service to consolidate multiple email accounts, don't bother and certainly don't try to hook this junk mail into your mobile phone.  Keep it simple; keep it web based; keep it at a distance.

Register Where You Shop

Wherever it is that you like to shop, start registering your junk email account everywhere you can.  The basic rule is to register anywhere and everywhere that you might spend money in the future.  Many of these websites will immediately send you some kind of a discount offer for registering with the site (though you're not obligated to go out and take them up on their offers).  Once you're registered, you'll start receiving regular emails with a wide variety of savings coupons, discounts, notices of sales, etc.

Here's the Trick

To actually save money instead of being induced to spend more, you should only check your junk mail when you need to spend money on something.  If a birthday is coming up and Macy's would do the trick, go into your junk mail and find the latest coupons and savings (by the way, we're convinced that Macy's has a sale 365 days each year as their 'sale' signs never seem to come down).  The most important thing to remember is to buy only when you need to and not just because there is a sale.

No Discount, No Problem

As you may have heard, the old adage of 'paying full price for something you need is better than getting 50% off of something you don't need' is an important one to remember.  If you need to go buy something, check your junk mail for a discount, but if there isn't one, no problem.  Buying something you need without a discount isn't ideal, but it's not as bad as wasting money on stuff you don't need.

Maintaining Your Spam

Since nothing in your junk mail account is really necessary, you can go in periodically and clean it out without fear of losing anything important.  About once every month or so, go in and delete anything that is more than 30 days old.  This way, the offers you have in your inbox will stay current and the amount of spam you're looking at will be manageable.

Wrapping Up

If you take some time to create a spam account and use it wisely, you can easily save hundreds of dollars each year with the coupons, discounts, and special offers received throughout the year.  The best part, of course, is your personal email will remain uncluttered and you'll still receive the full benefit of promotions from your retailers of choice.  Just remember to use your spam account only when needed because marketers are experts in sucking you into a sale.

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Why $1,000 to $1,500 Works for a Baby Emergency Fund

The idea of the baby emergency fund has been around for a long time, but it has hit the mainstream thanks to Dave Ramsey.  The reason $1,000 to $1,500 works so well as an emergency fund is (1) it can be saved quickly and (2) it covers most minor emergencies that come up.  Obviously we'd all like to have much larger cash balances sitting on the sidelines when an emergency strikes, but a baby emergency fund is good enough to get you through most of life's trouble spots.

Covering the Small Stuff

Most of us will have auto insurance deductibles under the $1,500 threshold, most appliances cost less than this amount, and all but a few auto repairs will fit in this range.  In short, most of the small stuff can be handled with a small emergency fund.  Larger emergencies like a loss of income, major health expenses, and the like will be outside of the scope of this small amount of reserves, but fortunately these types of emergencies happen less often than their smaller cousins.

Finding the Money

The quickest ways to come up with the money for a baby emergency fund is by (1) selling some stuff, (2) cutting savings, or (3) cutting expenses.  Sometimes the best thing to do is clean out your home, sell what you can, and donate the rest.  You'll make a few dollars on what you can get rid of, get a tax deduction for what doesn't sell, and have a less cluttered home.

If you're not into garage sales or ebay, cut your savings or one or more expenses to free up some cash to fund your baby emergency fund.  Sometimes it's as simple as reducing your savings or expenses for a short time until you have your $1,500.  If you're cutting expenses, take a good look at what you're spending and start cutting where it hurts the least.  Most of us will find a hundred dollars or more each month in pure wasted expenses so you probably won't need to look very far.

Stashing the Cash

Once you have your money, it's your call on how you'd like to stash your cash.  Some of the more creative ideas involve making origami out of 10 or 15 hundred dollar bills or framing the Benjamins with a 'break glass in case of emergency' sign, but you can also keep it under the mattress or in a savings account.  The key to stashing your emergency fund is to put it someplace where you won't be tempted to spend it on something that isn't of an 'urgent and important' nature.

*GASP* Emergencies Happen

Once you have your money set aside, an emergency will happen.  When it does, take it in stride and understand that since you have a small amount of money in reserve, you may have to drain and refill this fund several times until you can get in better shape financially.  You should not get discouraged just because you have to keep dipping into your emergency fund from time to time.  After all, this is the purpose of an emergency fund, right?

Wrapping Up

Though a large, healthy, maybe even fat, emergency fund is always preferred to a small, baby one, the bottom line is that having at least this $1,000 to $1,500 will keep you from being crippled by the smaller emergencies in life.  A baby emergency fund is a starting point in securing your financial life and is an absolute necessity.  The alternatives when this cash isn't available aren't pretty, so sell some stuff, reduce savings, or cut expenses until you have your baby e-fund.

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The Bureau of Labor Statistics (BLS) Inflation Calculator

This very fine example of a $20 St. Gaudens gold piece was minted in 1913, the earliest year for which the Bureau of Labor Statistics' inflation calculator has data available.  Since we were on the antiquated system of commodity money back then, it is an interesting exercise to see what $20 in 1913 would buy in today's dollars - particularly with the rise in gold prices over the last few years.  Obviously we're not using the gold standard, but let's take a quick peek at what inflation can do over a long period of time and compare it to the price of gold.

Overall Inflation

Using the BLS inflation calculator, the buying power of $20 nearly a century ago would now purchase $440.76 of goods and services today.  This represents a 22-fold increase in consumer prices as measured by the consumer price index.

Melt Value

Next, let's see what the melt value (the value of the gold if the coin was melted) would be.  The amount of pure gold in a $20 St. Guadens coin was 0.96750 ounces.  With spot gold at $1,243.40 as of June 24th's close, that would equate to a value of $1,202.99.

Collectible Value

Obviously the melt value is substantially more than the inflation adjusted value.  However, there is also some numismatic value to a the gold piece pictured above.  As of this writing, it was listed on eBay for the low, low price of $6,875!!!  Not bad at all.

Wrapping Up

Going through some inflation calculations is a valuable exercise because we can see how consumer prices have changed over time.  If you ask someone in their 70s or 80s how much they paid for their first home, there's a good chance that they paid more for their last car.  By using the inflation calculator, you can begin to understand the importance of accounting for inflation in your planning for retirement and college.

Critical Thinking

• If the gold standard were still being used in the United States, how would that impact the value of gold?  Would the $20 gold piece depicted here be value nearer the inflation adjusted price or the melt value?
• Gold is often touted as a hedge against inflation.  Based on this single calculation, it would appear that this claim is correct.  But what if you purchased gold at $700 per ounce in 1980.  Would you be ahead of or behind inflation today?
• Gold has seen two major price spikes since 1975.  One happened in the late 1970s and early 1980s, the other is happening now.  Should gold be a major part of your portfolio today?

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Unintentionally Disinheriting Your Children - It's Easier than You Think

One of the strange outcomes of sloppy estate planning work is the case of unintentionally disinherited children.  Obviously this isn't something that most of us want to do, as you can ask 100 parents off of the streets whom they want to inherit their estate and all but a handful would answer, "My kids."  Unfortunately, many estate plans fail to accommodate this simple wish.

How Disinheritance Happens

The most common way that an unintentional disinheritance occurs is responsible parents draft what is referred to as an 'I love you will'.  This is a simple will that essentially says that when one spouse dies, the other will inherit the estate.  When the second spouse dies, the estate will then go to the children.  Sounds reasonable enough, right?

This is all well and good as long as neither spouse remarries after the other dies.  However, many spouses will remarry and draft another 'I love you will', and this creates a major problem.  In this second will, children from the first marriage are left out in the cold, as when the second parent dies, the entire estate is passed on to the second spouse and not the children.  At that point, it is entirely up to the second spouse as to whether or not the kids will see any money.

Since it is a second marriage, the odds of animosity towards the second marital partner are significantly higher.  This means that the chances of an unintentional disinheritance are much greater.  To solidify this concept, let's use a hypothetical example.

Example:  Matt and Lisa and Jeff

Matt and Lisa were married at the age of 25 and had two children - Jake and Anna.  Being responsible parents, Matt and Lisa drafted a simple will that would pass the estate on to the surviving spouse and then on to the kids.  Unfortunately, Matt had a heart attack at the age of 42 and died.  Lisa inherited the estate and life insurance proceeds.

Lisa, also 42, began dating a couple of years later and fell in love with Jeff.  After dating for two years, they tied the knot at the age of 46.  Being responsible adults, they updated their estate plan to reflect their recent marriage and put together another 'I love you will'.  Their marriage was strong and everyone was happy.

Shortly after Lisa's 67th birthday, she died.  Her estate plan that was drafted more than 20 years earlier was reviewed and executed.  Jeff inherited the estate and Lisa's children received nothing.  Feeling this wasn't right, Lisa's children, Jake and Anna, contested the will to no avail.

This created animosity and Jeff decided to draw up a new will that eliminated Jake and Anna as beneficiaries.  And there you have it:  an unintentional disinheritance.

Wrapping Up

In this post, we examined the concept of an unintentional disinheritance and how it happens.  If you wish to avoid having something like this occur, there are a number of ways to do so that can be as complicated as drafting a trust with QTIP provisions to simply updating your will based on changing needs.  We will explore these solutions in upcoming articles, but for now, it is important that you recognize this problem exists - particularly if you're already remarried with children.

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