Friday, June 16, 2006

My Investment Plan for My Brother

Last night, I have discovered that due to the sale of my father's house as part of a divorce settlement, there will likely be some cash that will be available to be set aside for my brother for the future. When this became clear, I was the one that they thought of as a person to put the money away and invest it for my brother. Despite the obvious sadness of the divorce, The fact that I might be able to really contribute to my brother's well being later in life got me very excited.

College, retirement, cars, and real estate prices are only going up. My brother, who just turned four this past weekend, will likely be unable to take advantage of some of the opportunities of relatively affordable college and real estate. Furthermore, by the time I retire, there is very likely going to be very little money available for Social Security. If things are going to be bad for us, those of us who are in our 20s and early 30s, things are going to be even worse for the next generation.

Retirement seems to be a race to accumulate wealth. Even young children, when they are given one wish, will often wish for a large sum of money like a million dollars. Money is often something that you realize you need a large amount of, even when you are young. Time is the most important element of accumulating wealth. My stepmother is particularly concerned about my brother's potential ability to access this money too early. For me, this is also a concern because it would remove the power of extended time from the investment.

Assuming that most or all of the money stays put, a roth IRA would be ideal, in my mind. It would ensure that my brother could get at the principal if he wants to buy a car, but NOT the fifteen or so years of interest. So, although I would encourage him to leave all of the money alone, he would be able to remove some if needbe for something important. However, after a little more research, it became clear that a roth IRA will not be an option. A roth IRA requires that the money contributed is earned income. Clearly, my four-year-old brother cannot yet honestly earn income, so a Roth is out.

My next consideration is a basic mutual fund account that is a custodial account. But there are considerations there too. Namely, can I secure this money so that it is not taken out when my 13-year-old brother wants a pony? What happens to this money if I get hit by a bus? How do I protect the money from his parents if they have a desire to get it in the future? This type of account still seems to be the most likely result, but I need to figure this out. As I continue to learn more, I will write again. Check back here soon to find out what happens next!

Putting my Money Where My Mouth is

I've decided to start putting my money where my mouth is. This week there have been a couple of really nice days and I really wanted to go for a bike ride. My excuse? I have not been able to because of the fact that the bike I have is old and not really useable. Although this is an excuse, I have not been able to stop myself from looking at new bikes at the local sporting goods store. They generally range around 150 dollars. So, it would be nice to get one, but I've resigned myself to the fact that I will have to save money for one. I am going to 'delay' my gratification, at least a little while. Now just to figure out how much money I can save....

Thursday, June 01, 2006

Do you really need that gym membership?

Lately, I have been struck by how much money is being drained without my noticing. Small charges are adding up. Fees are hidden. And services (that I do not use) are being happily paid for, for months on end, without even a moment's thought. After doing some basic number crunching, I started to realize that I needed to take my own advice.

Not long ago, I was at my mom's house for dinner. Sitting at the table with me were my mother and my grandmother. And we started talking about gym memberships. I found it quite silly that people spend enormous sums of money on services that are not even used. And I stated that people who really want to have a gym membership and are considering getting one should do this:

1. Find out how much it costs per month.
2. Take that much out of your monthly accounts/spending money every month for the next 3 months and put it in a drawer somewhere and forget about it.
3. Go out every single week for the next 3 months and go for a 1-2 mile walk (roughly 45 minutes) at least 3 times per week.

If someone can follow those three steps and find that they are able to go without the money that it costs for the membership AND they are able to consistently exercise often AND still want the membership after 3 months, then I think that it makes sense to do it. If not, then I wouldn't. It will be a waste of money and ultimately, it will hurt your self-esteem.

It is bad enough to feel like you should exercise but don't. But, to feel like you didn't exercise and you wasted money on something that you didn't use and can never get back is even worse. Only a small segment of the population actually goes to the gym regularly - but lots more 'have gym memberships'. Personally, I don't have one. I may not be exercising as much as I should, but at least I can flex that bank account a little more.