Wednesday, October 08, 2008

Financial Prudence

BUFFET'S RULES. To help pay for the rescue, the government should raise taxes on the wealthy, Mr. Buffett suggested. "I'm paying the lowest tax rate that I've ever paid in my life," he said. "Now, that's crazy."

"CRASH" MCCAIN "Crash" McCain -- as he was known in the Navy -- is the son and grandson of admirals. McCain crashed three planes while in training to go to Vietnam. And he's still a reckless driver.

ADVICE. Advice to a friend who is unemployed:

1. Get up early
2. Eat breakfast
3. Leave the House

MRS. KIM AT THE CONWAY STORE. She runs a good business -- sells lots of gas and beer and food to go. I buy gas there, but I never buy the fast food, deep-fried, synthetic, mass-market tacos -- nooo, not this Yupppy.

But I like her deviled eggs. Mrs. Kim makes them herself. "They're good -- fresh every day," she says. I get three deviled eggs for $1.59 -- just right for a quick breakfast plus a bottle of apple juice. And Mrs. Kim is making money on the deal. Her cost is less than 50 cents -- for the eggs, mayonnaise, mustard, paprika and plastic container.

HOSPITAL BILLS. My friend Archie had out-patient surgery last week. They replaced the battery in his internal pacemaker. He said the battery lasted five years because it only kicked in two times -- lifesaving moments. The pacemaker de-fibrillates his heart muscle and gets it back on a steady beat.

"So, it took an hour and a half, and the bill was $47,000 from the insurance company, and I have to pay $7,000 out of pocket," Archie said.

Okay, on the one hand, Archie got a good deal -- for $7,000 he gets to live for another five years. I'd pay that.

But I told him to negotiate. Archie is in the construction business and he can bargain hard for a load of plywood, but he forgot to think that he could also negotiate with the hospital. I told him -- "Offer them $4,000. Tell them you can write a check today, but if they turn that down, you'll need to stretch out payments over several years."

You can ALWAYS negotiate with the hospital. In fact, in today's uncertain economic climate, you can negotiate with EVERYBODY. Every dollar coming in and every dollar going out -- can be re-negotiated. You might be scared because you've lost money on your IRA -- but the other guy is losing money too. And if he needs the cash more than you do, as in right now, then that puts you in a position to dictate terms.

FROG HOSPITAL -- FINANCIAL GENIUS. I am dispensing financial advice, because I can make a claim to prudence -- and lessons painfully learned from past failures. As of today, my income exceeds my expenses and I have no debts. I have two grown children who make more money than I do. That makes me part of the solution, not part of the problem.

I did take serious losses four years ago -- I made some bad decisions, and then I got stubborn and doubled down my bet. The consequence was that I lost a lot of money. I made the decision to sell my house to pay off my creditors. That gave me a clean slate and a smaller chunk of equity, which I still have.

It was very painful to lose 75% of my grubstake, but I took the medicine. No one was mad at me, because everybody got paid. It was just my own damn fault and my own money, which I lost.

But trimming away the toxic debt, as we call it now, left me in a true position and got me down to the solid nugget of what I truly owned. And from there I began the re-building process.

It has been slow going since then, but it feels awfully good to be moving in the right direction.

That's a personal story -- but it might be of some benefit to others who are facing similar troubles today.

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