Nobody likes to dwell on thoughts of mortality, especially young musicians who are just trying to get established in the world. However, the recent untimely passing of artists like Michael Jackson and his longtime guitarist, David Williams, should remind us all of the importance of basic estate planning.
You might be thinking "I don't have any assets to worry about, so why does it matter if I die without a will?". It matters because somebody will have to deal with your estate (no matter how small) when you die, and probably one of your close relatives will get charged with the task. Do you really want to subject your family to the trouble of sorting out your financial affairs, on top of the grief they will undoubtedly already be dealing with? Besides, I'll bet you have at least one thing that you would like to leave specifically to a particular person, even if it's just an old family photo album or a cherished instrument.
Unfortunately, it can be somewhat costly to hire an attorney to create estate documents for you, but that is the surest way to get the job done properly in compliance with your state and local laws. If you own substantial assets like a house, have multiple dependents, or an otherwise complicated estate, I would really recommend that you spend a few hundred dollars and hire an attorney to create your documents.
On the other hand, if you are a typical young, single, musician with a simple estate, it might be adequate to use some inexpensive software or self-help books for creating basic estate documents. Here are a few links to check out:
Make Your Own Living Trust
Quicken Willmaker
Suze Orman's Will and Trust Kit
The basic documents most often recommended for estate planning are wills, living trusts, and living wills. A will is your official statement designating the person you want to take charge of your estate distribution and how you want your assets handled upon your death. Dying intestate (without a will) usually leads to the state taking charge and might result in long delays or in your assets being distributed in some way that you didn't intend. Requirements for wills vary in different jurisdictions, and often even properly written wills must go through official probate hearings in court before assets can be distributed. A living trust is basically a way of transferring property without having to go through court probate hearings. It is useful to enable quick transfer of assets after your death. A living will or health care directive is a document that specifies your desires about life-prolonging medical treatments in the event that you become incapacitated and unable to speak for yourself.
It's also a good idea to speak with your heirs and put in writing your wishes regarding funeral arrangements, any people who should be notified of your death, what they should do with your pets, etc. The more openly you discuss this stuff now, the easier it will be for them when you are gone. And I hope that's a long, long time from now. But I recommend that you start the discussion now.
Friday, June 26, 2009
Friday, June 19, 2009
Hold the Sauce
Up-selling is the practice of trying to persuade a consumer to purchase a more expensive product, or additional related products and services. Salespeople are routinely trained to up-sell you into more than you bargained for because that is how a lot of retail businesses make most of their profits. It's also how you wind up spending more than you should, so stick to your guns and say "no thank you" to these types of up-selling scenarios:
1. When you purchase musical instruments, cars, or consumer electronics, you will almost invariably be offered an extended warranty at the time of purchase. I routinely turn down these warranties because a) I intend to take good care of my stuff, b) the things they are offering to cover may already be covered under the manufacturer's warranty or my own homeowner's/renter's insurance, and c) even if I do need additional warranty coverage, I can almost always find a better warranty deal from a third party rather than getting it directly from the seller of the product.
2. "Do you want fries with that?" "Would you like to try the special (for which no price is listed on the menu)?" "You can super-size it for only 45 cents extra." No thank you. No thank you. No thank you. The meal I ordered is really all I want. Ordering more is not only going to cost extra, it's going to make me overeat and feel uncomfortable.
3. Banks and other financial institutions may try to up-sell you into credit monitoring services, unemployment bill-paying insurance, overdraft protection, and all sorts of other costly extra services. Don't agree to these things unless you really read the fine print and conclude that it's a good deal and something that you really need.
4. Any kind of monthly recurring fee for a service that you are unlikely to use very much is probably a bad deal, even if the monthly amount sounds trivial. Your cell phone provider might offer you the ability to use your phone overseas for only $5 a month, but if you don't travel abroad very often, that basically amounts to throwing away $60 per year. And besides, the calling rates you pay will probably be high even if you do use the service.
All of these up-selling tactics only work on people who don't know what they want. As always, do a little homework in advance and you won't be vulnerable to such tricks.
1. When you purchase musical instruments, cars, or consumer electronics, you will almost invariably be offered an extended warranty at the time of purchase. I routinely turn down these warranties because a) I intend to take good care of my stuff, b) the things they are offering to cover may already be covered under the manufacturer's warranty or my own homeowner's/renter's insurance, and c) even if I do need additional warranty coverage, I can almost always find a better warranty deal from a third party rather than getting it directly from the seller of the product.
2. "Do you want fries with that?" "Would you like to try the special (for which no price is listed on the menu)?" "You can super-size it for only 45 cents extra." No thank you. No thank you. No thank you. The meal I ordered is really all I want. Ordering more is not only going to cost extra, it's going to make me overeat and feel uncomfortable.
3. Banks and other financial institutions may try to up-sell you into credit monitoring services, unemployment bill-paying insurance, overdraft protection, and all sorts of other costly extra services. Don't agree to these things unless you really read the fine print and conclude that it's a good deal and something that you really need.
4. Any kind of monthly recurring fee for a service that you are unlikely to use very much is probably a bad deal, even if the monthly amount sounds trivial. Your cell phone provider might offer you the ability to use your phone overseas for only $5 a month, but if you don't travel abroad very often, that basically amounts to throwing away $60 per year. And besides, the calling rates you pay will probably be high even if you do use the service.
All of these up-selling tactics only work on people who don't know what they want. As always, do a little homework in advance and you won't be vulnerable to such tricks.
Friday, June 12, 2009
The Monthly Trap
How much is your monthly car payment? I'll bet you know the exact amount right off the top of your head. How much do you still owe on your car loan? I'll bet you don't know! Which is the more important amount of the two? That depends on your perspective. For the sake of getting through the next month without having your car repossessed, the monthly payment may be your immediate concern. But for the sake of your long-term financial health, total debt should be your primary focus.
Don't ever fall into the trap of thinking in terms of "how much I can afford per month". Thinking that way only ensures that you will never get off of the perpetual debt slavery treadmill. Sellers of big-ticket items like cars, appliances, houses, cosmetic surgery, etc. love to pitch their products in terms of monthly payments, because it makes them seem affordable. But ultimately, you will have to pay the total cost of that item, plus whatever interest they are charging on your loan, so you're better off just facing right up to that bottom line price from the beginning.
It might not always be possible to avoid taking out a loan for certain purchases. If you're a performing musician, for example, you probably really do need to have a car, and sometimes it just might not be possible to get one without borrowing. Also, some kinds of debt, for items like real estate or education, may sometimes prove to be good investments for your future. So I'm not 100% opposed to all debt. But I am about 98% opposed to debt! In fact, I hate debt so much that I personally haven't had any outstanding loans since 1994. I just face up to the total cost of whatever it is that I want to buy, and if it's too much for me to pay in full, up front, then that means I can't afford it. That's really the bottom line.
Living debt free allows you to sleep better at night. It shrinks your monthly bills down to a size that is easier to keep up with, freeing more of your time for personal and creative pursuits. And it opens up the possibility that one day, if you save and invest and continue to stay out of debt, you might actually achieve true financial independence and not have to work at all! The alternative is to keep taking out loans and struggling to make minimum monthly payments, forever living under the shadow of your debt overlord!
One exception that I make in my staunchly anti-debt personal financial strategy is the use of credit cards as a convenient method of interest free payment. It is very important to point out here that credit card debt is one of the worst, highest interest forms of consumer debt. However, in the U.S., credit card companies are required to allow an interest free grace period for prompt payment in full every month. As long as you always pay off your total credit card bill within the grace period, you will pay no interest and benefit from the convenience of using a card to pay. And you will also be building a good credit history. For those who lack the discipline to restrain spending and always pay the full bill within the grace period, please ignore the preceding suggestion and cut up those cards instead! Debt sucks. Monthly payments are the tempting sirens that entice you into debt hell. Don't fall for it.
Don't ever fall into the trap of thinking in terms of "how much I can afford per month". Thinking that way only ensures that you will never get off of the perpetual debt slavery treadmill. Sellers of big-ticket items like cars, appliances, houses, cosmetic surgery, etc. love to pitch their products in terms of monthly payments, because it makes them seem affordable. But ultimately, you will have to pay the total cost of that item, plus whatever interest they are charging on your loan, so you're better off just facing right up to that bottom line price from the beginning.
It might not always be possible to avoid taking out a loan for certain purchases. If you're a performing musician, for example, you probably really do need to have a car, and sometimes it just might not be possible to get one without borrowing. Also, some kinds of debt, for items like real estate or education, may sometimes prove to be good investments for your future. So I'm not 100% opposed to all debt. But I am about 98% opposed to debt! In fact, I hate debt so much that I personally haven't had any outstanding loans since 1994. I just face up to the total cost of whatever it is that I want to buy, and if it's too much for me to pay in full, up front, then that means I can't afford it. That's really the bottom line.
Living debt free allows you to sleep better at night. It shrinks your monthly bills down to a size that is easier to keep up with, freeing more of your time for personal and creative pursuits. And it opens up the possibility that one day, if you save and invest and continue to stay out of debt, you might actually achieve true financial independence and not have to work at all! The alternative is to keep taking out loans and struggling to make minimum monthly payments, forever living under the shadow of your debt overlord!
One exception that I make in my staunchly anti-debt personal financial strategy is the use of credit cards as a convenient method of interest free payment. It is very important to point out here that credit card debt is one of the worst, highest interest forms of consumer debt. However, in the U.S., credit card companies are required to allow an interest free grace period for prompt payment in full every month. As long as you always pay off your total credit card bill within the grace period, you will pay no interest and benefit from the convenience of using a card to pay. And you will also be building a good credit history. For those who lack the discipline to restrain spending and always pay the full bill within the grace period, please ignore the preceding suggestion and cut up those cards instead! Debt sucks. Monthly payments are the tempting sirens that entice you into debt hell. Don't fall for it.
Friday, June 5, 2009
Lowest Price Doesn't Necessarily Equal Best Deal
Regular readers of this blog know that keeping costs low lies at the heart of my financial philosophy. If there is a way to save a nickel on something, I will invariably find it. And while I still firmly believe that low living expenses are the key to financial success, I don't always advocate going for the rock bottom price on every purchase. Instead, for the sake of minimizing long-term expenses, I would suggest that thorough knowledge is essential to finding the best value among products or services.
Your local dollar store is full of examples of what I'm talking about. Have you ever purchased a $1 pair of headphones? That is certainly the lowest possible price, but there's no value in that purchase. Once you hear how they sound (if they produce any sound at all), you will realize that you haven't saved any money -- you've just thrown away a dollar! I don't mean to pick on dollar stores, actually I shop for lots of little items there, but only when I know that the quality is comparable and the price reliably lower than at other retailers.
When comparison shopping, it is very common to find that the cheapest available product is of considerably inferior quality. I suspect that we have all experienced this frustration of buying the cheapest item, only to immediately discover that it won't do. Then you have to go out to buy another one again, and you also waste more time shopping when you could have been home writing a song.
A lot of people go for the lowest priced junky product or service simply because they are too broke to afford the better one that will actually last and get the job done properly. If you're in that position, then you probably shouldn't be shopping at all, you should be saving up and researching the market until you can afford something worth buying.
Don't get me wrong. I'm not encouraging you to go on a first-class spending spree. In fact, there are many cases where the cheapest option is actually just as good as the most expensive option. Gasoline is a good example. There is virtually no difference in quality between the most expensive brand name gas and no-name discount gas, despite what some TV commercials might suggest. But you need to do a little research to find these things out. And once you are armed with knowledge of the market for a given product or service, you will also be able to negotiate for it with greater confidence.
Your local dollar store is full of examples of what I'm talking about. Have you ever purchased a $1 pair of headphones? That is certainly the lowest possible price, but there's no value in that purchase. Once you hear how they sound (if they produce any sound at all), you will realize that you haven't saved any money -- you've just thrown away a dollar! I don't mean to pick on dollar stores, actually I shop for lots of little items there, but only when I know that the quality is comparable and the price reliably lower than at other retailers.
When comparison shopping, it is very common to find that the cheapest available product is of considerably inferior quality. I suspect that we have all experienced this frustration of buying the cheapest item, only to immediately discover that it won't do. Then you have to go out to buy another one again, and you also waste more time shopping when you could have been home writing a song.
A lot of people go for the lowest priced junky product or service simply because they are too broke to afford the better one that will actually last and get the job done properly. If you're in that position, then you probably shouldn't be shopping at all, you should be saving up and researching the market until you can afford something worth buying.
Don't get me wrong. I'm not encouraging you to go on a first-class spending spree. In fact, there are many cases where the cheapest option is actually just as good as the most expensive option. Gasoline is a good example. There is virtually no difference in quality between the most expensive brand name gas and no-name discount gas, despite what some TV commercials might suggest. But you need to do a little research to find these things out. And once you are armed with knowledge of the market for a given product or service, you will also be able to negotiate for it with greater confidence.
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