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Daddy diaper duty

Before we had our daughter, my wife and I extensively discussed diapers. We (like most new parents) had to decide if we would do cloth or disposable diapers. Neither of us had a preference, but being a financial planner, we first had to analyze the financial impact of this decision.

We live in California, so we know the cost of living is much higher than most parts of the country. We did some research on diaper costs, and it was startling. Based on our research, the average monthly cost for disposable diapers ranges from $150-$200/month ($1,800 – $2,400/yearly). There were some lower averages, but these figures were closer to our reality since we’re in California.

My wife and I weren’t enthused about those numbers, so we turned our attention to cloth diapers. First, we have an in-unit washer and dryer, which would help us avoid making all those trips to the laundry mat. But, the trade-off is that we would have increased water usage each month, and the electric bill would increase. And, since we can’t just toss a dirty diaper into the trash, we would have to consider the time we would have to spend cleaning diapers. This time commitment would end up falling on my shoulders. (Since my wife nursed, I volunteered to handle diaper duty.)

Then, we took a look at the cost of cloth diapers. But, before we got heavy into the research, our good friend told us that she had been saving her newborn and infant (a set of 60) cloth diapers for us. And, shortly after my wife let some people know we decided to go the cloth diaper route, we were then gifted a large box of 30+ infant cloth diapers. So we didn’t have to pay anything for diapers. We are super thankful our village helped us save money.

But, since the Smith family is big on crunching numbers, here’s the breakdown of what it would have cost us for the cloth diaper brand we were initially gifted. We received a set of 30 newborn diapers and a set of 30 infant diapers. The set of newborn diapers would have cost us $568.50 ($18.95/diaper), and 30 infant diapers would have cost us $748.50 ($24.95/diaper). So, for $1,317, we had a solid stash of cloth diapers. That big box of 30+ infant diapers was just gravy on top.

What’s interesting about this diaper adventure is that many people doubted we would stick it out. When I would tell people we’re doing cloth diapers, they would say, “We’ll see how long that lasts,” or “Y’all are still doing cloth diapers?”. But that was just noise that didn’t faze us one bit. We had a plan, and we stuck to it.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

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Credit card myth busting

Over the years, I’ve heard a ton of bad information about credit. I’ll never know why this is, but I’ve spent a considerable amount of time on credit card myth-busting.

I should first thank my mom for giving me a dynamic credit card lesson when I was 19 years old. She laid out the credit card “game” in minutes. And because of that, I’ve always felt compelled to share my mom’s lesson with the world.

There’s one credit card myth that continues to bother me to the core. Here it goes.

The Myth: When you consider getting a credit card, you should first consider the interest rate.

Many people will have you believe the interest rate is the most important thing you should consider before getting a credit card. Unfortunately, it isn’t. My mom first explained this to me during that credit lesson. She said verbatim: “If you use your credit card each month and pay off the balance in full when you get the bill, the interest rate will never apply to you.” Simple right?

So, whether the interest rate is 19%, 28%, or some other variable rate, it’s irrelevant if you consistently pay off your balance in full. I’ve had many people challenge me on this, but again, I was trained by someone who has always had excellent credit. If someone is getting a credit card and is concerned about the interest rate, they’re already telling themselves (mentally) that they will overspend and maybe not pay off the balance in full.

Someone reading this may still want to challenge me. Interest rates do matter when it comes to debt. Just not credit cards. Interest rates should be scrutinized when considering a car or home loan. That’s a debt that you might have for a while. Credit card debt is something someone should only plan on having for a short time.

So, what is the first thing someone should consider when getting a credit card? (All of these would be acceptable answers.)

  • Does the card offer rewards?
  • Is there an annual fee?
  • Are you in a position to make the on-time payments each month?

Okay, before I finish up, another myth bothers me, and it also needs to get busted.

Myth: It isn’t good to max out your credit card during the month Nope. It’s only bad if you don’t pay off the balance (hopefully in full) when you get the bill.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

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Granny’s investing experiment

A few years ago, I attended a volunteer event where I spoke about the importance of having a financial plan. After my talk, a woman approached me and said she wanted to try out an experiment with her grandkids.

We set up a meeting about two weeks after that talk, and she was clear about how this experiment would go. She said, “Over the next 5 to 10 years, I want to give each of my grandchildren $2,000 every Christmas.” She had four grandchildren in total.

With this gift, she wanted each grandbaby to invest the money in the stock market. She said she wasn’t comfortable educating them about investing and would prefer they work with a professional close to their age. So, that’s where I came in.

Here’s a little background info on Granny. She was in her late seventies and doing well financially. Right before she shared this idea for the grandbabies, she came out and told me that she had more than enough money in retirement and would be good unless she lived past 110 years old. Despite her success financially, her biggest concern was leaving a lasting legacy for the grandbabies.

What this grandmother was doing was disrupting generational poverty. Many people don’t start investing early in life and, therefore, don’t have a great relationship with investments as they age. She didn’t want that for her grandbabies. She figured if she provided them with investing education and funded it along the way, there would be no way her grandbabies wouldn’t have sizeable portfolios in 10-15 years.

So here’s how things went. Granny initially hired me to do four educational sessions, with the first starting in early December before they were to receive the first $2,000. We would then do quarterly check-ins. We would reassess after year one to see if we would continue for another year.

After that first meeting, each grandbaby had to explain to me what investment they would select and why. The next three sessions involved us analyzing and discussing how that investment performed over the previous quarter.

After that first year, this grandmother’s four grandbabies had grown leaps and bounds regarding their understanding of the wild world of investments. While most hesitated to decide on what investment they would select with that first gift, it was easy for them to quickly determine what they would do for the next Christmas gift.

We made such great progress in year one that we would only have two meetings, 6-months apart, for year two. This was going to be the real test. How would the grandbabies fare without meeting with me so often? They did just fine.

All the usual fears people have around investing were removed from this group. All the analysis paralysis people get when deciding on an investment was gone. All the uncertainty and discomfort people feel when investing was no longer present because we had extensive conversations about risk. I did for this group what I do for all my clients. I make investing simple and easy.

In the end, Granny got what she wanted. She solidified her legacy by helping her grandbabies learn how to invest and showed why having ongoing conversations about investing is important. Wealthy people always talk about investing, so she figured, why not them?

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

Happy 1st Birthday, Jaslyn!

Baby in the Black

The balance sheet is a very important financial tool I recommend everyone use. It’s a great way to measure your financial progress at a moment in time. It captures what you own (assets) and what you owe (liabilities) and produces your net worth.

Before meeting my wife, I updated my balance sheet every quarter. I started doing it because I used to obsess over reading these articles about the world’s wealthiest people. They would always report that such and such was worth x amount of billions or millions of dollars. So, I began computing my net worth to see how I progressed.

While we were dating, I figured letting her know about this balance sheet thing I was doing every three months made sense. This way, once we got married, it wouldn’t be uncomfortable for us to discuss our financial status. Fast forward a few years, and my wife and I have continued to update our balance sheets every quarter.

Then, we decided to have a kid. And this kid turned out to be a little girl. This little girl would be setup for financial greatness shortly after she was born. If you still need to read my piece called 18-year head start, you should check it out.

As of this writing, my daughter is a little over one year old and has a considerable amount of assets. Of course, she has no liabilities and probably won’t have them for at least another two decades. So, let me say that again. My daughter will grow her asset base for twenty years and has no debt. Could you please do this for your kid(s)?

Then it hit me! My daughter will have thousands of dollars in assets and no debt until she can purchase her first home. And her assets will have grown so that even when she takes out a mortgage for her home, she may still have a positive net worth. That’s crazy, right???? I thought so, too! And when I started thinking about this, I got excited.

I wanted to memorialize this since she’s young so I can look back when she’s older to see how things turn out. My wife added the cherry on top when she said this…”We are raising a baby that might always be in the Black.”

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.