Enjoying the holiday weekend and pulled something out of the vault originally written back in August of 2015 for my regular job in personal finance. I think it is relevant and satisfies the blog mission. Enjoy Memorial Day, remember those who served and thank them!
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As a dual U.S.-Greek citizen with family in Greece who I visit almost every year, I think I have a unique perspective on the latest news coming from there. During my recent visit, I saw the long ATM lines first-hand after the banks were closed and severe capital controls (still in place) were instituted.
What can the fate of Greece teach us about personal finance? Here are some important lessons:
Don’t spend more than you can afford. This is Personal Finance 101, the golden rule to follow if you want to avoid bankruptcy. Greece must first stop producing primary deficits so it can then begin reducing its mountain of debt. Everyone knows at some point there will be more debt relief in some way or form. At the same time, sometimes we need to take steps to improve our marketable skills, whether through investing in an advanced degree or in specialized training, so we can compete better in the globalized economy. And Greece could sure use some growth-inducing investments to jumpstart its economy and spark job growth. It is not an easy balancing act.
Avoid debt. This seems obvious now. But for several decades, more loans, debt servicing and debt rollover were an afterthought in Greece until the debt load became so huge no one was willing to lend to them anymore. Greece’s coming third bailout (Update: There was a fourth one in May 2016 and will likely be more!) after six years of depression and huge unemployment should serve as a warning that it is better to avoid debt, especially credit-card debt with its highly punitive interest rates. Aim to live debt-free and pay off the mortgage before you retire and you won’t go wrong. In my career, no client ever said they wished they had not paid off the mortgage early.
Execute the plan. In financial planning, we try to come up with a sensible plan to achieve each client’s cherished goals. But the plan does no one any good unless it is implemented. As we do with investment portfolios, we review them at regular intervals and rebalance as necessary to adhere to the agreed asset allocation plan. It is a disciplined way to “buy low and sell high.” Greeks pass laws but have a huge problem implementing them. Without implementation, plans (or laws) are useless. Procrastinating is not implementing.
Always have a Plan B. It is fairly evident now that the new Greek government never had a credible Plan B in the negotiations with their creditors. As a result, they were forced to accept what is commonly accepted as a humiliating deal for yet another bailout. In financial planning, true financial independence means having good options available to us at critical life moments. The Greeks were left to choose between the worse and catastrophic options as the bad and very bad options were no longer available.
Do not burn bridges. The Greek negotiating strategy was disastrous. They managed to alienate every single member of the eurozone while eventually asking them for another multi billion euro bailout. It is foolish to alienate your co-workers. So be nice to people who will be evaluating your performance whether you are interested in that promotion within the company or an interview with another company.
Actions have consequences. And so do votes. At the end of the day, Greek voters elected their leaders to govern. We were in Greece when the decision to close the banks was announced. I drove my 13-year-old daughter to the main bank branch in my hometown and told her, “This is what happens when a country is not governed well; bad governance has consequences.” And so do actions you take with your money. If you pile up credit-card debt, fail to participate in your company’s retirement plan or contribute less than enough to get the full matching funds, or treat your 401(k) plan and home-equity loan as piggy banks to indulge on the latest electronic gadgets or exotic vacations, you will face consequences at some point in the future. Take positive actions today.
Change is hard, but necessary. When something is not working in your personal financial situation, it is best to take immediate corrective action because delaying such action will make the effects of the eventual change even more dramatic and painful. For example, if you have a problem overspending on your credit cards, it is perhaps best to cut them up; if your job is damaging to your health you may want to find another one. But Greeks are finding it extremely difficult to change their ways. No real reforms have taken place yet. The third bailout term is still full of higher taxes and no spending cuts in the bloated state sector. At the end of the day, you are primarily responsible for your own destiny. (Update: The fourth bailout in May 2016 makes prior higher taxes and reductions in wages/pensions look like childs’ play! Amazingly, there have been virtually no firings in the state sector still, the current governments protect their own voting blocs! #thehorrors),
Brings to mind “the beatings will continue until morale improves”. You can replace morale with ANY reforms as there haven’t been any!
I will try to answer questions on the subject. I have written more about Greece here and more here.
And I leave you with this…
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First on Memorial Day. No jokes today.
The medals today are dedicated to the fallen soldiers.
Alright team Buzz, I need your help.
I have 55,000ish thank you points that expire today, so I need to do something with them. I’m leaning toward Etihad or Singapore, but am open to suggestion. Go!
I tweeted your question so hope that generates some responses. But if not, blame the holiday!
I saw an email from TYP today having a sale of gift cards. 50%, 40%, 30% off! You know I deleted it but maybe you get desperate lol.
Looks like from Citigold?
FlyingBlue, if you’re in a decent Delta city, or one that has AF/KLM discount fares.
I’m in Omaha, so I have to connect through a hub no matter where I go.
I really think the best use of TY points are flights on AA. Do you have any upcoming trips you need to book?
I have a trip that could be booked on AA, but not definite dates. I ended up going with singapore for either hawaii or caribbean travel. Or singapore suites again… 🙂
I have never been to the Maldives
Or took a selfie in a shower in the air
And only seen Singapore Suites in other blogs
Am I worthless as a human being? Or at least as a travel blogger?
Golden State Warriors win 3 straight, WOW!
And how else was I supposed to transfer between my Cathay and JAL first class flights? Now who looks like a jackass…?
With the amount of champagne and whisky I drank for free over those 5 days of travel, it’s amazing that I made it to my hotels or back to the airport, especially in Tokyo. That’s my one piece of advice on Tokyo, is be prepared to find your way around on the map I linked to.
That map…omg. I can see your point 🙂
“Aim to live debt-free and pay off the mortgage before you retire and you won’t go wrong. In my career, no client ever said they wished they had not paid off the mortgage early.”
Seems like there is so much misinformation out there on paying off your mortgage early. I keep telling a family member that paying off a mortgage is good, but their retort is that they will have nothing to write off and be taxed even more. I don’t understand the logic, but it seems like they are stuck in their ways, so I’ve washed my hands of it. I guess if you’re not financially stable or set, you’d make such a case?
Oh the inane tax deduction justification
So they are paying one dollar every month but, with the mortgage interest deduction, they pay 75 cents.
Pay 0 and keep it all.
In addition, the psychological benefits of not owing anything to anyone is WAY under rated. It is like a perpetual FU state of mind.
Most don’t get it. Heck, most live paycheck to paycheck. You can only do so much to help. Hope it is not too late when they decide to take action. Lot of our money behaviors were developed as children (as many other things as well).
I need to get some sleep…
I’ve come to the conclusion that I no longer having any issue taking advantage of airlines via mistake fares, website glitches or otherwise.
Want to change your flight because there’s civil unrest or a viral outbreak at your destination – $300/pp please. Show up 55 min before your flight due to traffic. We won’t check your bags or put them on a later flight, but we will charge you $500/pp to get on a later flight. Find TAP business class availability and want to book it with your Singapore miles. Sorry, that is one of 2 partners out of 20 that we won’t book one way and sorry you already transferred your miles to us. Want to book the SAS business class availability that is showing on United. Sorry, it’s just a website glitch and sorry, again, that you already transferred miles to us. Can’t check in because we’re having a merger-related issue and you booked your flights through the other airline. We won’t hurry to fix it so you can make your flight, but we will put you on a flight 5 hours later with no compensation.
You make many great points!
Thank you Miles Math.
Couldn’t add checked bag to your ticket online because out website was malfunctioning? $60 please. Checkin lady told you the weight of your carryon was fine, then security told you too heavy, go back and check it, another $60.
About Titan bashing. There is bashing for the sake of bashing and envy, then there is that aimed at people promoting products that aren’t really in the best interest of readers.
Is that gif for real? I think it has got to be staged, what do you think?
Bloggers blog. Readers read. Some comment. There will be reactions and there will be assholes. Like in real life. If a blogger can’t take some negative feedback, some inane comments, some completely ridiculous and downright bizarre, if not pure bullying….perhaps they should not bother! If the only feedback they get is of one kind, well, maybe, just maybe there is a reason for it.
For example, my feedback has been scarily positive. Yeah, it scares me all this love towards my blog. And then I get the occasional nasty feedback which is so out there, it increases the entertainment factor to the nth degree!
And we go on…