MattHutter.com

Today I turn 37.  Here’s what I have learned so far.

1. After God, my family is the most important thing in my world.  Subtract your money, house, career, health and “stuff” and tell me what you have left.  I still have everything I need when you take those five things away.  Actually, not much changes for me when you take all of those away.
2. Your kids really don’t care one bit about that big promotion at work.  Your kids don’t care about a $10,000 raise.  Or a $20,000 raise.  Or a $50,000 raise.  I am 37.  I have never met a person whose favorite childhood memory was their parents buying a bigger house.  Or their parents getting a new Lexus.  Or a vacation to Hawaii.  I enjoy all of those things.  But they do not matter at all to your kids.
3. A college degree is no guarantee of career success in this world.  A mere high school diploma is no guarantee of lower career success.  One increases the odds of financial success.  One increases the hours to reach financial success.  I know a man who completed his four-year degree at age 37.  I am 37.  He spent 15 years completing that four-year degree.  He took one class per semester.  Slow and steady wins the race.  He had a wife, three kids and a house on a large property to maintain.  He did not complain.  He was the lowest paid employee in his department.  If you continually do more than you are paid to do, eventually you will be paid more for the work that you do.  Where is my friend now?  He is the boss of that same department.  He has 20 people working for him.  He says he is the most financially successful of his six other siblings.  When the previous manager was asked who should replace him, he replied “Eric is my number one choice.  Numbers two and three are so far down the list they should not even be considered for this promotion.”  Eric didn’t care what people thought of him.  He still doesn’t.
4. Why is it that I have met near-genius-level people whose personal lives are in shambles?  They cannot manage money, marriage, family or career.  These people have IQs nearly twice mine.  Are they smart?  No, they are not smart.  They know mountains of information about everything, yet they know nothing about life.
5. At the end of the day and the end of your life, all that matters is your relationships with those you love.  See item #1.  Take away all the peripheral “stuff” in your life and who loves you?  Do your kids love you?  Does your spouse love you?   If you and your family had to sleep on park benches at night, would your relationship change?  Do you make your loved ones happy by buying them “stuff” or buying time with them?  Quality time is a term created by those who have no time.  It’s the quantity of time that matters.
6. If you take parenting seriously, it’s hard work.  If you have to bribe your kid to do something you have a problem.  I do not believe in “choosing your battles” because that is a cop out.  Consistent rules and consistent behavior get consistent attention from your kids.  If you scold your child for lying about his homework, but then have that same child tell the phone caller you are not home, you have a real credibility problem.
7. “When I was a boy of fourteen, I was embarrassed to have my father around.  By the time I turned twenty-one I was amazed at how much the old man had learned.” - Mark Twain. I am still not smarter than my dad.  I am 37.  He is 62.  Every time I think I know more about a topic in life, he proves me wrong.  Just when I think I have him figured out, I learn what shaped him to think that way.  It was not at all what I thought I knew.  I would not change one thing about the childhood he gave me when I was growing up.
8. My mom should be part of the Greatest Generation, but she’s stuck in Baby Boomer clothing.  She is 60.  She does not complain about anything to me, ever.  She is not a whiner.   She has held the two most important jobs on this planet.  She ended one at 37 and began the other at 37.  I am 37.  My mom ended the job of stay-at-home Mom to begin the job of school teacher.  My brother and I now realize that she chose to give us that life because it was important to us and important to her.  I would not change one thing about the childhood she gave me when I was growing up.
9. My brother had more major life experiences in a few years than most of us have in one life.  I had originally typed all the up and downs of his life in his 20s, but I’ll let him share that with you should he choose.  From his 20s to his 30s, he found a solid career.  He found money.  Plenty.  He found religion.  Plenty.  He found himself.  And best of all he found love.  Now, that he’s found love he can see steps #1 and #5.  And I need to find myself writing one amazing best-man speech for his wedding in eight months. 
10. The difference between optimism and looking through rose-colored glasses is that the latter becomes the former if you do it long enough.  Whoever came up with the expression “rose-colored glasses” must have been a pessimist.  People say that because they are frustrated that the person keeps seeing everything in life in a positive way.
11. Breaking off an engagement is much easier than breaking off a marriage.  Two of my childhood neighbors are each experiencing one of those right now.  One got hurt before decades of marriage, one after.
12. If you say someone’s name enough times while passing them, eventually they will learn yours.  Sometimes they ask your name instantly.  Sometimes it takes longer.  I once said “Hi, Amy” to a woman in my office for three years before she finally said “Hi, Matt.”  That is a lot of fun.  I guess I can make people want to learn my name.  It’s exactly like the first chapter of How to Win Friends and Influence People.  Dale Carnegie was right.  A person’s name is the most important thing in the world to them.
13. Working for a bad boss can make your life a real pain.  Of the bad bosses I’ve had, all were divorced and had very few friends.  Is that a coincidence?  Maybe, maybe not.  If you don’t care about the careers of your employees, you should not be the boss.  If you have never exercised compassion or care for your employees you should not be the boss.  If you have lied to advance your career or to hurt your employees, see step #5.  If you are stuck with a bad boss for more than 12 - 18 months, it’s time to change jobs or talk to the bad boss’s boss.  Well-run companies let their managers spend 25-50% of their time developing the employees.  I had one boss for three years who spent 0% of his time developing his employees.  He has since been been demoted from manager back to employee.
14. You are wasting your time if you are dating someone you would not marry.  In a healthy dating relationship the ultimate plan would be to wed.  I realize it can take months or years to learn if this person is the one, but as soon as you are sure either way make the move.  Upon graduation, that’s why so many couples break up or get engaged.
15. Extroverts have it much easier in life.  I feel sorry for folks who are so shy that they cannot even say “hi” to someone in the grocery store, library or church.  I am an extrovert.  I use a person’s name every time I talk to them.  I would rather get the name wrong than use no name at all.
16. I spend around zero minutes per day worried about what you think of me.  Life is easier when you don’t care what people think.  That does not give you permission to be a jerk, but it allows you to make decisions based on your personal situation at that exact moment in your life.  I made two major life decisions in the last several years that are not popular at all.  Two major media outlets wrote up my story and millions of readers read those stories about my wife and I.  You can read both of those life decisions under the “about Matt” part of this website.  I am 37. During the next 37 years, I will probably make more decisions that are not very popular at all, but they are the best decisions for my family.
17. I believe in personal responsibility.  You are the result of how you’ve responded to the cards you’ve been dealt.  Personal responsibility defines my views on finances, politics, health and a host of other things.  Most of where you are today was your doing.  It’s not your childhood’s fault.  It’s not your parent’s fault.  It’s not your spouse’s or children’s fault.  It’s not your boss’s fault.  It’s not your government’s fault.  You are where you are today because you put yourself there.  Good, bad and everything in between.

I hope you have learned something, too.  Time for some birthday cake.

Sometimes the U.S. financial markets give the appearance of complete and utter disaster.  Of course, the media has accurately predicted 27 of the last two recessions. :)  As with all media, the bigger the story the more viewers watching that story.  Over the last decade or two the media began to report only major index point-drops on Wall Street, not the percentage of the drop.  When the market indexes were smaller this made for a big story.  Some examples:

Black Thursday  (1929-1932)  340 point drop or 89% of the Dow over three years

Black Monday (1987) 508 point drop in the Dow or 22.6% in one day

September 11 (2001) 684 point drop or 7.1% the week after the attacks

As shown above, three of the largest financial crashes over the past 80 years have become less and less damaging to the U.S. economy.  Each one has become diminishingly less destructive to the overall market.  With the advent of halt-trading systems and the advancement of overreaction mitigators, the U.S. remains a very robust economy.  With some estimates at 20 million illegal immigrants, can any other country claim the long waiting list to share this great wealth?

Most economists would agree that the best politicians propose economics that are best long-term for the country, not the politician’s political party or personal career.  It is unfortunate that the U.S. is less than 50 days from a presidential election now because the politicians are spinning the causes of this economy more than a merry-go-round.  When these supposed financial disasters occur, lawmakers will throw out knee-jerk reactions such as bailouts or more regulation.  What did America’s financial system get from the September 11 attacks and a few scandal-ridden companies?  Sarbanes-Oxley financial “safeguard” legislation that arguably emasculated New York City as the world’s financial capital and transferred that title to London.

I have several thoughts about politicians who choose the bailout option for self-inflicted ill companies.  I think of judges giving multiple-DUI offenders their driver’s license back.  I think of a parent letting a child off the hook for misbehaving when he or she absolutely knew better.  How can a CEO, upper management or the board possibly learn any lesson if they are granted a “do-over” when the company implodes?  Capitalism flourishes in its purist form for one basic reason:  free markets work.  Communist and socialist economies will always fail over time because the government cannot permanently “prop up” businesses that should not be strung along.

Failure is part of the natural cycle of business.  Companies are born, companies die, capitalism moves forward. -Fortune Magazine

If I haven’t put you to sleep on this financial and economics topic, I highly suggest you check out Thomas Sowell’s Basic Economics which is the best book on economics I’ve ever read.

I was intrigued to learn that my college roommate Chris and another friend Marta both paid off their mortgage in their thirties.  This is quite an accomplishment.  First, they both defied the idiotic, asinine conventional wisdom that you want a mortgage for the tax deduction.  I won’t even respond to that misguided anti-logic.  Second, they bucked some members of their own families who thought paying off the mortgage was nuts.  Third, they did this twenty years earlier than most people who pay off the mortgage in their fifties or sixties.  I asked each of them the same questions with their responses below.

Why did you pay off the mortgage early?

Chris:  Intuitively, it just felt right.  For a few years there, we were a bit flush with cash, with two of us working and zero to one kids.  Looking forward, I knew eventually the economics would dictate that one of us should stay home.  I like to keep things relaxing, and counting on the market to grow our wealth while carrying debt was calculus that made me uneasy.  Maybe you can boil it down to a low degree of confidence in corporate America, which I knew pretty well.

Marta:  The plan originally was to pay off the mortgage while we still had two incomes, before our first child was born.  That way I could quit and be a stay at home mom and with the loss of income we would also have less debt.  Yes, I grew up with Depression era parents who always encouraged saving, and I’ve never liked any kind of debt hanging over my head.

How long did it take from the time you decided to do it and when it was paid off?

Chris:  It’s a bit hard to remember, but I’d guess about the 5 year mark, we started to see that we could do it if we really wanted to.  I think we had it paid off by the 8 or 9 year mark.

Marta:  I bought our first house in 1992, on just my income, even though we knew we were getting married soon.  We didn’t want to have too much of a house to pay off.  We got married in 1993, and every month put extra on the principal.  Also around that time my mom gave me a sum of money from my late father’s estate that I put on the principal and we refinanced to a 15 yr mortgage.  We continued to pay a good amount on the principal every month and in January 1998 we paid that mortgage off.  John (Marta’s first child) was born in April 1998 and I quit my job.

Did any friends or family members think you were nuts?

Chris:  There were probably people who thought we were nuts.  But if they knew me well, they knew I was nuts already.  I think after the fact when people found out (and we didn’t really advertise the fact) they’d say ‘man, wouldn’t that be nice.’

Marta:  My brother-in-law especially thought we were nuts.  He thought we should invest the money we got from the other house.  But then we would still have had a house payment.  And also he doesn’t have any kids and I tried to explain how my situation was different from theirs, and that the peace of mind from no mortgage was priceless when you want to stay at home with your three kids.  I also told him that if, for some reason, Nick (Marta’s husband) lost his job, it wouldn’t be so devastating financially.  Ultimately he didn’t understand my point of view.  My mother was very supportive, she thinks it’s what everyone should strive for, since they never had a mortgage!

Would you do it again?

Chris:  In my mind, life without debt is a better life.  So yes, we’re always going to be working to lessen or eliminate our debt load.

Marta:  I would definitely do it again.  It made it easier for me to stay at home.  And we were able to save for the kids college and retirement and just in general, because we didn’t have a house payment.  I’m very glad for my parents influence.

Themes From Their Answers

Chris and Marta touched on so many themes with their responses.  I think they’ve covered all the major topics on this blog just in one interview with me!  Debt, paying cash for things, savings, living below your means and more.  Some highlights from Chris and Marta:

“I like to keep things relaxing”  - I interpret this to mean that Chris does not like unexpected, financial disasters.  Neither do I. :)  By being mortage-free, few emergencies in life could really “rock the boat” too much.

“low degree of confidence in corporate America”  - I interpret this to mean that Chris or his wife could be out of a job at any random point in today’s economy.  By having no house debt, he didn’t have to worry about dragging himself into a job he disliked just to pay the mortgage.  Ultimately,  Chris did quit his job to be at home with the kids, but that’s a whole separate story.

“grew up with Depression era parents” - Marta implies that she knows the importance of living life with no debt, paying cash for purchases and other habits we learned from her parent’s generation.  Today’s youth could learn more from Marta’s parents (and Marta!) than any personal finance book anywhere.

“John was born … and I quit my job” - well how many of you out there *wish* you could do that?  Quit your job to be at home with your kids.  It’s a positive step for nearly all families that do it.  Sadly, most couples think they need two incomes to get by today.  My wife and I took a 50% pay cut for her to stay home with the kids and we never looked back.  Smartest thing we’ve ever done.

“My mother …. never had a mortgage”  - this is totally incredible that Marta’s mother never had a mortgage.  Do you hear what I’m saying!!???  Her parents paid cash for every home they owned.  That is truly remarkable.  And although it may have occurred more  in the 1930s, 40s and 50s it’s still an impressive feat.  I would not say it was a common thing to pay cash for your home then or now.

“Life without debt is a better life”  -  Chris could not have said it any better.

“I would definitely do it again” - Marta knows where she stands in this hyper-materialistic society in which we live and she still would do it again.  But, Marta, what about you driving nicer, newer cars or taking more exotic vacations?  I already know her answer:  this plan works for her - her family and financial future.

Thanks, Chris and Marta, for letting me profile you on MattHutter.com!

Recently I had lunch with a friend who makes six figures per year.  Here in the Midwest that is a fabulous salary.  He has a comfortable desk job that is inside a nice, air-conditioned building.   He and his wife drive new cars and he has an in-ground swimming pool.  He must love life, right?  He must be a happy camper, right?  Most of the world would kill for this kind of luxury.  Now, let me share some more details about his story.

He filed for bankruptcy eight years ago and apparently has not learned any lessons from that ordeal.   Filing for bankruptcy is very similar to debt consolidation.  You are basically using your Get Out Jail Free card with little consequence or learning involved.  It’s like a grownup’s version of a “do over” from childhood.  With no pain involved what’s from stopping it from happening again?

On a more day-to-day note, he lives paycheck to paycheck.  Actually he does not quite make it to the next paycheck.  Once he told me how he writes himself a check for cash the day before payday.  He found an ATM that surprisingly allows funds to be withdrawn immediately after a deposit.  When money runs tight, he’ll withdraw the funds from this “deposit” to make ends meet before payday.   It gives him the much-needed cash infusion before he gets his paycheck.  Some of you might have heard another term for this act:  kiting checks.  It is classified as check fraud and playing the “float” between the time of the check being cashed and the deposit of the check itself is illegal.   In some instances, he did not make it in time and had to pay overdraft fees.  He was on the phone complaining with the bank so many times they almost knew him on a first-name basis.  If he just built up an emergency fund none of these cash shortages would have come into play.

Next,  I’ll discuss his car purchase fiasco.  He went to buy a minivan for around $20,000.  Unlike most car purchase stories, negotiating with the dealer does not even come into play here.  When he went to trade-in his old car, he learned that he was $5,000 in over his head on that one.  The dealer also somehow managed to tack on $8,000 more in an extended warranty, underbody rust protection and a bunch of other junk.  Bottom line:  he paid $33,000 for a $20,000 minivan.  This is quite remarkable.  Just on that deal alone he came out $13,000 more in the hole than needed.

If he woke up today and decided to fix his money problems where would he start?

• Make some big lifestyles changes quickly.  Sell both cars and pay cash for very cheap cars.  Or live with one car.  Driving a junker car is only temporary to get him back on the saddle.
• Cease to use credit cards - permanently.
• At each job change or pay raise, bank that money.  Do not change the lifestyle.
• Recognize that these changes today will make for a much happier tomorrow

I’ve oversimplified the remedy for his issues but the above items are great starting points for my friend to begin to enjoy that six-figure salary.

Recently the media has been covering the defaulted home loan on Ed McMahon’s Beverly Hills mansion worth approximately $4.8 million. Now, before I comment on Ed’s finances here are some of the most popular highlights of his life:

• He was Johnny Carson’s announcer for 30 years (1962-92) on The Tonight Show
• He was host of the talent show Star Search from 1983 - 1995
• He became the well-known pitchman for American Family Publishing arriving at your doorstep to announce your winnings in the sweepstakes
• He has co-hosted the Jerry Lewis Labor Day Telethon
• In the 70s and 80s he helped anchor NBC’s coverage of the Macy’s Thanksgiving Day Parade

So, in essence, he’s had more career success than many folks experience in ten lifetimes. I enjoyed watching Ed on television and I like him as much as any other regular American. However, seeing this recent coverage announcing that he’s $644,000 behind on his mortgage payments on a $4.8 million house made me wonder quite a few things. (He did break his neck 18 months before the home foreclosure problem so that certainly affected his income generating ability.) According to one source, Ed was once worth $200 million in real estate holdings in Malibu, but the same source neglects to mention one key fact: how much did he owe on that real estate? At age 26, financial phenom Dave Ramsey had $4 million worth of real estate but he owed $3.5 million on it and ultimately went bankrupt. OK, back to Ed. He peaked with a potential net worth of several hundred million dollars. He was beamed into our living rooms for over 40 years. He was arguably one of America’s best emcees and announcers and co-hosts. But when you take away all the glitz and glamor and career success he’s experienced, he’s just another Joe Six-pack getting pinched in a foreclosure mess. Although his mistakes have a couple extra zeros on the end of them in size.

Lessons Learned from Ed McMahon’s money problems

• If you have no savings, all your material possessions are useless when your income stops
• Massive financial success in your career does not guarantee financial success managing your money (see M.C. Hammer, Michael Jackson, Mike Tyson, Burt Reynolds, etc.)
• Relying on future income exclusively is not a financial plan (see Ed’s broken neck)
• Having multiple divorces destroys net worth real fast

At the end of his career and life, will Ed wish that he had done things differently? Would any of us trade his life for ours? For some, the cost of a huge income is all of the huge problems that sometimes go along with that huge income.