Beware... the Great Money Monster
“The monster was the best friend I ever had.”
— Boris Karloff
The monster of Frankenstein is arguably the most recognized horror movie character of all-time. The work delivered by Boris Karloff has been recognized for decades by both professionals and pop-culture alike as both masterful and iconic. But did you know that Boris Karloff was not even recognized as the star of the original film? Not only was the character listed fourth on the Playbill, but the name of the now famous actor was not even listed, but rather displayed as “?” to create additional mystery. Real life monsters are not so different are they? We rarely recognize the horror we have created until it is too late, patching and weaving the monster, all the while, through unnoticed missteps and unbridled decisions. It’s Alive! It’s Alive! While movie monster making seems to happen overnight, real life Money Monsters are rarely created overnight. They are typically a combination of decisions or lack of decisions over a longer time span. Here are some strategic essentials that will protect you from creating the Great Money Monster.
1. Don’t wait for a full moon to start an Emergency Fund. While your target should be to maintain three to six months of living expenses in an emergency savings account, this huge task can scare some people from ever trying. Start by making it a major goal to get $1,000 into the account and then contribute at least something every month to build up to your target amount.
2. Do not hang onto debt like a creepy family pet. If you must borrow from a bank or credit card, have a plan to pay much more than the minimum payment. Use a debt snowball to eliminate unsecured debt. Payoff your smallest debt first, then add the payment from your first debt towards the payment for your second debt, and so on…
3. Do create a spending plan for your monthly Monster Mash. Living on a true budget that decides where every dollar is going before it is spent is a difficult idea for many, but is likely to be the most important financial decision you may ever make. While there are many ideas for budgeting out there, I recommend a straight envelope method for those who can pull it off. This method requires that each dollar is placed into an envelope for each specific spending category at the beginning of the month or pay period. When the money is gone from the envelope, so is the spending until the next month’s refill. For the less analytical, look into the 50/20/30 method. This method directs that no more than 50 percent of your take home pay to be used for basic living expenses. At least 20 percent is used to pay down debt or for savings. And finally, if both of those are satisfied, no more than 30 percent to be used on lifestyle choices. A Google search for “envelope budgeting” or “50/20/30 budget” will bring up many additional examples and guidelines to get you started.
4. Gather a team of professional monster hunters. Money Monsters can be challenging to suppress and downright overwhelming if full-grown. While there is a popular mindset that many financial planners will not help you unless you are independently wealthy, there are many fee-based or fee-only planners that will simply charge a fee for time spent. A Certified Financial Planner™ certification should be a minimum requirement for your financial advisor of choice. Additionally, there are a growing number of websites like LearnVest.com that can supply great tools and economical financial advice from certified professionals as well.
No need to grab the torches and pitchforks this Halloween. Get started on these core essentials and rid your life of Money Monsters for good.
RC Arseneau is a Certified Financial Planner and lives with his family in Delaware. Please submit any questions or topic requests to AskRc@mail.com.
The information and opinions in this column are provided only for educational and entertainment purposes. Any reference to a financial product or strategy is not to be considered an endorsement or recommendation. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional financial, legal or tax advice. Investment Performance may vary due to timing and expenses. Rc recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.