Many of us probably look back occasionally with incredible fondness at our youth. We think of how carefree we were, with no house to take care of, no children to worry about, no elderly parents requiring our time.
Sure, you had a job and some other obligations, but those were nothing like the responsibilities you have today. As you look back through those rose-colored glasses, however, try to recall some of the less desirable aspects of your younger years.
Most of us probably had incredible anxiety over things like whether the guy or girl you were going out with Friday night would like you, and how the evening would turn out. Or whether your boss would notice the report he asked for was a day or two late. Would you be able to afford a new muffler for your car? Would you have enough money to go away for the weekend, or did you have to save it all in order to pay the rent next week?
When you really think about it, you’ll probably conclude that being young and just starting out had some drawbacks as well as some advantages.
Hopefully, you’re more financially comfortable today than you were 20 or 30 years ago even if you’re not quite at where you had hoped you would be by now. In this chapter, we’re going to consider your assets—both the material kind and the really important assets like family and good friends. Let’s take a look on the plus side. You just might end up feeling better than you thought you would after reading this.
If you own a home, you’ve got a great investment, and you’re in some good company. Almost 72 million Americans owned their own homes in the latter part of 2000, according to the U.S. Department of Housing and Urban Development.
Whether you’ve lived in your home for 25 years or two months, it no doubt is very important to you. We go to extraordinary lengths to make our homes and yards attractive, and we invest a lot of ourselves—not to mention our money—in our homes. Why?
To most people, a house is much more than a building in which they live, or an investment that they hope to resell for more than what they paid.
Your house is the place where you raise your kids, and maybe care for your grandkids, too. It’s where you entertain your friends and family. Your house is filled with (or will be) memories of birthday parties, dinners with friends, and nights by the fireplace.
You decorate your house on special holidays, and watch to make sure the roof isn’t leaking or the paint peeling too badly from the window sash. Your house is your escape from the big, noisy, and busy world. It’s the place you can go and take your shoes off, and just relax.
In addition to all that, your home probably is the most expensive investment you’ve ever made. Whether you paid $80,000 or $300,000 for your home, it probably represents a good portion of your overall assets. If you’ve been in your home for a while and have a lot of equity, the property is a good source of financial security. Equity, you’ll remember, is the difference between the current market value of the home, and what you still owe on the mortgage.
Almost 68 percent of Americans own their own homes—a record high. There must be something about home ownership that we like!
You can borrow money against the equity in your home. Or you can downsize after your kids have moved out and invest the money you make from the sale of the bigger house in your retirement fund.
If you find when you’re older that you’re strapped for cash, you can even take out a home equity conversion loan on your home, also known as a reverse mortgage.
These are arrangements in which a lender pays the homeowner (that would be you) a monthly payment with the idea that the lender will be repaid after the property is sold. It’s the opposite of a traditional mortgage, in which the person living in the home pays a monthly rate with the goal of eventually owning the property.
There are several types of reverse mortgages, including those that are federally insured, those that are uninsured, and one called a reverse annuity mortgage. Each type includes advantages and disadvantages. A reverse mortgage, which is available in most states through a bank or agency, is probably not something you would consider for now. Reverse mortgages aren’t available to folks in their 40s and 50s, but you can keep this information in mind for later, or in case it becomes necessary for your parent.
Maybe you’re at the point where you’re starting to think about moving. Maybe you’re tired of spending all weekend keeping up with your yard work and are thinking of moving to a place with less upkeep. Or maybe you’re looking for a home that would be suitable in case Dad has to move in with you. Maybe your house is just too big, now that the kids have moved out.
All of Part 3, “Hearth and Home,” is devoted to housing issues, so we won’t spend time discussing them now. If you are thinking about moving, however, you’ve made a wise choice to start looking at your options early, instead of waiting until you’re forced to make a move. It’s always better to move because you want to than because you have to.
Just for fun, go to www.realtor.com, and click on the area that says “average home price.” Enter your zip code when the box comes onto the screen, and you’ll get, in addition to the average home price, all kinds of great information about your own zip code area. You can check out the crime rate, average age and income of residents, and a lot more.
Regardless of what your income is, you probably wish it was more. The most frequent job-related complaints don’t involve bosses or working conditions—they’re all about salary. Living these days costs a lot of money, there’s no question about it. We swear that groceries cost more every time we go to the store. Gas prices are enough to make you want to take a train. Dinner for two can easily top $60 or $70. Even a movie for two without the popcorn can run you $15 or $20. If you’re still looking down the road at paying college costs while trying to save up for retirement at the same time, chances are you sometimes feel a little squeezed in the financial department.
Maybe you’re lucky and have a fabulous job with a great salary. They’re out there, after all. In 1999, John T. Chambers, the president of Silicon Valley–based Cisco Systems received total compensation (cash, bonuses, his gain on stock options, and other forms of compensation) of $121,701,629. That’s—no kidding—more than $120,000,000.
For information about every job you can imagine, including average salaries, required training, job outlooks, and so forth, check out the 2000–2001 edition of the Occupational Outlook Handbook from the Bureau of Labor Statistics. You can find it online at stats.bls.gov/ocohome.htm.
Don’t feel too inferior, though. Chambers, who was 50 at the time, was the highest-paid of all Silicon Valley executives that year. Poor Timothy Cook, the senior vice president at Apple Computer, was the 100th highest paid. He made only $4,260,818 in total compensation. Cook was 39 at the time.
In all likelihood, your salary doesn’t come anywhere close to what either Chambers or Cook earned in 1999. Hopefully, though, you’re making enough to live comfortably while still able to save some money for later in life. Regardless of what your salary is, it’s probably your main source of income and a very important asset. It’s what you count on, week after week, and month after month. It buys your groceries, pays your mortgage or rent, and keeps your lights, phone, and cable turned on.
Without your salary coming in, life could get pretty uncomfortable. You’d probably be forced to very quickly alter your lifestyle and rethink your priorities. You should have an emergency fund available that would cover your living costs for three to six months in the event that you lose your job, get sick and can’t work, or face other emergency circumstances.
If you’re really dissatisfied with the salary you’re earning and you’re convinced that you’ve performed your job at least adequately, consider asking your boss for a raise. Check out comparable salaries in similar companies. Look in the classified employment ads to get an idea of salaries for jobs like yours. If you do decide to ask for a raise, keep these pointers in mind.
If you’re a good employee and you’re staying in a job for which you’re badly underpaid out of loyalty, or inertia, or because you’re scared to make a move, know that you’re not doing yourself or your family any favors. There is a high demand for experienced, dependable employees right now. If you’re not getting the salary you deserve, you should look around at what else is available.
If you’re looking for a job, remember that the Age Discrimination in Employment Act of 1967 was written for people who are 40 or older. It’s to protect us from employment discrimination based on age, both as employees and job applicants. If you feel that you’ve faced discrimination because of your age, contact the U.S. Equal Employment Opportunity Commission. Check to see if there’s an office in your area. If there isn’t, call 1-800-669-4000.
If your salary doesn’t seem like it’s enough, maybe you ought to look at bit more closely at how you’re spending it. We’ll talk about budgeting in Chapter 5, “Getting It All Together,” but for now, just give a little thought about where your salary—one of your chief assets—goes.
If you’ve been watching and planning your finances up to this point, you should have some money in savings accounts and other investments. Most people automatically think of the stock market in terms of investing, but you could have multiple investments without owning one stock.
There are many types of investments—stocks being just one of them. If you’ve been contributing to a 401(k) plan at work, that’s a very good investment, and one you’ll be really happy to have when you retire. Other retirement-based investments you might own include individual retirement accounts, Roth IRAs, SEP IRAs, Keoghs, and annuities.
In addition to retirement accounts, which we really hope you’ve got a good start on, you may have other investments as well. These could include stocks and bonds, mutual funds, money market accounts, and certificates of deposit. You may have money invested in real estate, personal property, or collectibles.
You should have some money available in savings accounts, although it’s not a good idea to keep too much money there. Most financial planners will advise you to keep enough in your savings account to help you with your bills and ensure adequate cash flow. If a major bill is due on Tuesday, and pay day isn’t until Friday, you can use the money in your savings account to cover the bill, then pay yourself back when you get paid. You probably shouldn’t keep more than about $3,000 in a savings account.
All these accounts and other investments are important assets that you should carefully monitor.
We Americans sure do love our vehicles, don’t we? Ever since Henry Ford rolled out that first Model T in the early part of the twentieth century, we’ve been in love with automobiles.
We write songs about them, collect replicas of them, spend hours washing them, and compare the ones we’ve got to what somebody else has. Cars and their variations—trucks, vans, and sport utility vehicles—are by no means unique to America, but many people in other countries have trouble understanding our fascination with them. They also harbor some resentment over our gas-guzzling vehicles and how they eat up so much more than our share of that limited natural resource—oil.
All that aside, your car, truck, SUV, or whatever assemblage of vehicles you own, must be included with your assets. If you’re financially savvy, you’re not likely to get sucked into the vehicle game that requires you to have two designer-edition SUVs in the driveway and a flashy little Boxter in the garage to drive on weekends. All that status comes at a high price. Unless you’ve got more money than you know what to do with, we’re hoping that you’ve got a couple of Fords parked in the driveway and the rest of that SUV/Boxter money invested in your retirement funds.
We all know that families can be exasperating. Your spouse or significant other sometimes irritates the heck out of you. Your kids, stepkids, his kids, her kids—whoever they belong to—talk back to you and get huffy when you try to pass along the smallest bit of advice. Your mom still think she can tell you how to live your life, and your stepdad has an annoying habit of showing up on Saturdays and hanging around for hours. A bit of sibling rivalry remains between you and your brothers and sisters. Your aunts and uncles still embarrass you at family get-togethers, and your cousins think that it’s fine to tease you the way they used to when you all were kids. Family . . .
What is a family, anyway? These days, there are more definitions for family than there are for middle age. One thing we know is that the definition of family has changed significantly in the past 40 or 50 years. Gone are the days when the only “real” families were those with two parents who lived together with their children. We came across a definition on the Internet that we like. It says simply, “The family is who they say they are.”
Nowadays, families are anything from two parents and kids to same-sex couples. There are single parents raising their kids, and families where two sets of kids live with a parent and stepparent. There are grandparents raising grandkids, foster parents raising kids, and people who share housing out of necessity.
However you define your family, and as trying as your family members may sometimes be, think for a minute how empty your life would be without them. Family and real friends—the people who stick by us through everything—are the greatest assets and should be those that we guard most closely.
By the time you reach middle age, many people have found their place within the community where they live. You’ve probably made some friends—good friends—in your community. Maybe you serve on a municipal or school board, volunteer at the local library, or coach your son’s Little League team. Perhaps you’re active within your church or synagogue and have connected there with other community members. Or, you might direct a theater group or run a community music school.
Most people enjoy getting involved with the people and activities around them. Not everyone, however, has the opportunity to be a part of a community, and some people simply don’t choose to be.
Those who have to move frequently because of their jobs or for other reasons may never get a chance to connect with the people around them. People in poor health may find it difficult to be involved in their communities. And, those folks who work 60 hours a week and 12 more on weekends are not the most likely candidates for community-minded citizen awards. Some people simply prefer to keep to themselves and not get involved with their communities any more than is absolutely necessary.
Don’t Go There
Don’t expect your kids to be community-minded citizens if you’re not. Some parents want their children be involved in community events while they ignore what’s going on around them. Kids learn first by example.
Being an active part of your community can be a real asset. The best way to get to know people and to pursue your own areas of interest is to get involved. Some advantages of being active in your community include the following:
If you don’t think of your community and the opportunity you have for involvement there as assets, give the concept a little thought. Your community is really an extension of your family and your home. It’s the place where you make your life.
Hopefully, your assets are many, and you’re grateful for them. Remember when you tally up your balance sheet of life that your assets include a lot more than your home and portfolio.