Father Sez

Though I keep track of my loan balances in my year end net worth computations, I have never really sliced and diced them to look at them from different perspectives.

Today I did just that.

The breakdown of my loans (by percentages) is as follows:

This is not good. The number of months left assumes that I’ll have the same earning power over the next 6 years or so may not be realistic. Though I have a couple of irons in the fire, they are still a little long shots at the moment.

More confirmation that my debt levels are not good is shown when I apply Moolanomy’s DTI ratio calculation.

The present payment is a whopping 39% of gross income.

My wife and I have decided to put up on our houses for sale. The rental returns we are getting is far inferior to the savings that we’ll make if the sales proceeds were to be applied to loan settlement. (We are lucky to have a truly wonderful and responsible family as tenants, so at least there have been zero headaches. My wife and I are also probably rated by them as great landlords as we have maintained the same rent for the past 6 years.)

If the property were to be sold and the net proceeds used to repay loans, our loan profile will change as follows :

The DTI now becomes a much more manageable 7.40%.

This will lessen the financial pressure for me as I yearn for a much better life / work balance.

We put up the house for sale about a couple of months ago. Perhaps we are making what “FMF calls the No: 1 reason why houses are not being sold” mistake.

My wife tells me that her instinct is that we would not sell the house and something else would happen that would change our financial plans for the better.

I don’t know. This is something that I also have to discuss with my two elder girls. The house has many good memories. This was our first home, all the houses before were rented. (The 3 younger kids were also born here).

What do you think? Am I doing the right thing? Your advice and views will be most appreciated.

I am just rounding up my trip to Mali, West Africa and am preparing to go home. For geography and statistics buffs, a summary of the country is listed here. (by no less than the CIA).

It is a very poor country, with a GDP per capita of USD1,200 per annum. As with most statistics, this is an average.

Much like if you put your legs in boiling water and cover your head with ice, statistically you would be warm all over. So you see a large number of Mercs on the road, except that the owners probably represent less than 1% of the population.

The population breakdown shows almost 50% between 0 -14 years of age, a really young population.

Fortunately for me, I did not have a whirlwind schedule like what Brip Blap described recently. We had a chance to visit two towns away from the capital. (Though I really wanted to, I could not visit famed Timbuctoo, about a 1,000 km from the capital.)

The lessons I am bringing home for myself is deep, unbridled gratitude.

Gratitude for the unexplained events of chance that resulted in me being brought up in my country, where I had a much better education and hence a better chance at life.

Gratitude that I am better off than perhaps 95% of Mali’s population of 12 million people.

Gratitude that whatever my debt levels may be, I still have a very decent roof over my head, food on the table, electricity at the flick of a switch and clean fresh water at the turn of a tap.

Gratitude that my children have a much better life than those little boys and girls who, burnt black by the sun, run after cars and try to sell tissues, toothbrushes and other assorted items.  

My wife continualy advises me that we should always look downwards, so that we look at the so many people who do not have what we have and feel grateful. Rather than upwards at all those Richie Rich people and envy them.

I slip up on this quite often.

The trip has nailed this lesson to me once again.

MMND has mentioned a memorable quote in her article on the proven power of gratitude. ”

“In our daily lives, we must see that it is not happiness that makes us grateful, but the gratefulness that makes us happy.”
 

Albert Clarke

May my gratefulness today and everyday make me happy!

Recently Madison at the Dollar Plan and some of her blogging friends got together and came out with an excellent series of articles chronicling the financial strategies that should be put into place as we fall into various age bands.

This has made me review my own plans for helping my children lay a better foundation in their own personal finances and lives.

The two eldest girls are now in their final year of undergraduate studies, both of them on Pa & Ma scholarships. Sadly I was seldom around when they were growing up as I was working overseas. Thankfully some foundations have been laid by my wife and I want to see how it can be taken to the next level. Right now, the girls are on course for forming / mixing around with a peer group that takes pf seriously.

I have read and digested Mrs. Micah’s College Money Matters, Cash Money Life’s  Money Tips for the Twenty Something Crowd and Remodeling this Life’s Financial Advice for Your Twenties.

Having these resources have been a great advantage, thanks guys!

What should I focus on now?

a) Further studies

Along wants to do her Masters in Educational or Child Psychology, whilst Azah wants to do her CFP in Islamic Finance.

Should they do these part-time, or should they seek study loans, scholarships or employer paid tuition to pursue these?I have to give some thought to this.

b) Career Plan

This is an area where I have personally failed badly. So I have no intention of not guiding my children. I have to discuss with them and explore their preferred careers, identifying the companies or organisations where they want to work, preparing their killer resume, going the extra mile to secure the interview, preparing for it and then doing well at the interview are all matters that have to be addressed.Then there would be the matter of discussing how to manage their colleagues and bosses.

c) Finance

The first would be budgeting with the paying yourself first element firmly entrenched.  This may be based on the envelope system to start with. I would also like to suggest the “James Plan” of savings with a virtual employer.Then a major discussion on the power of compounding and how it can be made to work for us or if we are not careful, against us.   They also have to be introduced to checking accounts and how to balance their books. 

Then on creating the emergency fund, basic investing knowledge like mutual funds, index funds and ETF’s.  Some background on insurance, mortgages and loans should round it up.

Emily made a telling statement.

To quote her, 

This is the best age to be frugal because living frugally early on is the foundation for the rest of your life and will give you the opportunity to live well while also living below your means.

Unquote

And Trent over at the Simple Dollar reminds us that the age between late childhood to settling down with a family is the best age for entrepreneurship.

This is in line with what my wife and I would prefer. Still it’s the girls’ lives, so they would have to make the final calls. So far they have not indicated any signs of the Donald in them yet.

I have to now think carefully about crafting a series of lessons or posts (as my daughters and their friends read my blog) on how best to achieve this. Lessons that they find acceptable.

After all, the most memorable quote on advising children I have read is (I am sorry, I can’t remember the source now, but it must be from a blog), that the best way to advice children is “To find out what they want to do, then advice them to do it.”

I have been inspired by some of the pf bloggers doing a review of their 2008 goals, now that about 8% of the year has passed us by now.

And the goal under review is “Imparting to my children the two most important  PF lessons that I have learnt“.

a) Goal 1

To get my elder girls to join a peer group that has pf as a core subject.

My idea was for them to start reading the pf blogs. Over time, hopefully the useful advice given(especially since they are mainly real life experiences) will have some effect on them.

The good thing is that the two elder girls are reading my blog and also the links that are being provided. The both of them have occasionaly commented on my blog.

They have also told me that Mrs. Micah’s mom is cool. The eldest once sent me a text message saying that she had read and commented on “Millionaire Mommy sumthing sumthing”

I have also forwarded them some of the oustanding career tips that can be found in Free Money Finance. 

Some of their friends are also reading my blog. This is a very promising step.  

I think this goal is being on its way of being achieved.

b) Goal 2

Teaching the younger children to “pay themselves first”.

In late November 2007, the two younger children signed allowance agreements with their mother. (I signed as a witness). They would both receive weekly allowances, they had to save at least 10%, and maintain accounts of their allowance.

This has gone on well for the past 2 months. Somethings to note:

 -  the boy just had two entries in his accounts ledger everyweek, the receipt of the allowance and the out to his piggy back. Basically he spent zero. It seems that he had stashed away the cash gifts received during our festive holidays and was spending them.  His mother and he have agreed to bank in this stash and we should now be better able to track his spending.

- Nana, (our fourth girl), is a little more lavish. She maintains the 10% (in fact, it is a lot more that 10% savings), but she also spends on stationery etc. I have talked to her about her seemingly lavish ways. I have to see how this develops. Nana also had her stash and this has also been banked in.

The weekly ritual of them presenting their accounts books for inspection and getting their allowance has had an effect on our youngest girl. She gets her allowance daily. I think she is also a little more careful with her spending, because my wife says that I am not giving her enough.

Anyway, she has also asked for a bank account and this has also been done.

In conclusion, I think this goal is progressing well. 

I like the way, D4L has weaved a story around the pf lessons to his children. I must do the same. Perhaps something from the “Richest Man in Babylon”.

Our “little girls” are adults now.

Along, our eldest will be 22 in April while Azah, our second will be 21 in May. They are now both busy planning their careers. My wife and I shall do our best to help by guiding them not to make the mistakes that we had made. There is however, one issue that the children would have to decide on by themselves. Choosing their spouses. Early Retirement Extreme wrote a post on “How to be happy in the long run”, which included a section on choosing a spouse. My understanding is that he has suggested “stress testing” the potential spouse to ensure that we end up marrying “a survivor” as he puts it. I am not so sure if I can suggest this advice to my children.

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