On the Money Trail
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Money and Health: The Inseparable Link
by Al Jacobs, author of Nobody's Fool
March 2007

Benjamin Franklin summed up life’s most valued qualities when he wrote “Early to bed and early to rise, makes a man healthy, wealthy, and wise.”  Not only do the three factors—health, wealth, and wisdom—constitute the basis of a satisfying life, but they depend upon one another.  It’s obvious that unwisely engaging in gambling or drugs results in wealth and health crises.  But perhaps, just as telling, if you fail to control your monetary affairs, it will reflect on your well-being.  A recognized cause of depression and accompanying physical maladies is financial distress.  The term for this sort of illness is psychosomatic.  It follows: If you handle your money improperly, plan to be sick.

With that said, let’s focus on five areas of financial involvement that cause most problems.  Conduct your life prudently and you’ll achieve prosperity, feel contentment, and experience exhilaration.  You might call it reverse-psychosomatic wellness.

1.  Beware the minimum payment trap.  No single implement leads to greater misery for more persons than the credit card.  Its aggressive promotion by the banking industry over the past decade is scandalous, with rules established to generate unbelievably high costs for unwary cardholders.  Through manipulation by the issuers, annual interest rates can exceed 30 percent, with victims caught in a perpetual cycle that goes on for years.  I believe a credit card serves a single purpose: a convenience when neither cash nor check is readily available.  Purchases should be made in a manner that the account balance is paid in full each month before any interest is charged.  Conduct your life by this rule and no problem exists.  If for any reason you cannot do so, cut up the credit cards with a scissors and adjust your life accordingly.

2.  Harnessing the horseless carriage.  With the exception of hearth and home, the motor vehicle constitutes the typical American’s most important fixation.  No other product is more forcefully marketed, and far too many people succumb to its allure.  I’ll put it bluntly: No one should drive a vehicle that is financed or leased.  Whether you’re at the wheel of the latest Detroit behemoth or a less imposing conveyance, you’ll arrive where you’re going at about the same time.  Despite the hype, dependable transportation is really all that’s needed.  You should acquire your transportation 100% cash on the barrelhead, even if it means you drive a 1984 Toyota Corolla.  At a later date, when your fortune is deservedly secure, you may feel free to sport a brand new Rolls Royce—but again, devoid of any financing.

3.  Blowing it on the kiddies.  Too many dollars that go toward college tuition and ancillary expenses are wasted.  The educational establishment has convinced the nation that post secondary schooling must appear prestigious and be costly.  The result is that untold numbers of college graduates and their parents are in hock big time, some never to emerge from debt.  An entire industry exists to promote such programs as the widely ballyhooed 529 Plans and Coverdell Education Savings Plans, by which funds are set aside for future educational costs.  What a waste!  Most are designed to benefit the operators far more than the intended recipients, with built-in costs that defy rational analysis.  Similarly, student loans should be avoided whenever possible.  The educational years are better spent in scraping by financially, and such an introduction into adult life can have untold benefits.  I advocate college-on-the-cheap, with the freshman and sophomore years spent at a community college, commuting from home, and the junior and senior years at a reasonably priced local state university.  For a bright and diligent student, the education received is as good as four years at Harvard.  And parents should entertain no feelings of having somehow deprived their progeny.  The finest gift a parent can give an offspring is the assurance that child will never need to support an indigent parent.

4.  Beware the scam artists.  There’s no limit to the number of persons and organizations that want to take advantage of you.  Unless you arrange it otherwise, you’ll be put upon.  There’s a pretty fair chance your stockbroker will palm off on you a front-loaded mutual fund instead of an economical no-load fund.  It’s quite possible that the variable annuity you just purchased contains an unmentioned 7-year cancellation penalty.  Expect a sales representative of The Perfidious Mint to fleece you with its half-pound silver commemorative medallion at the “special advance price of only 239 dollars.”  Don’t be shocked if a life insurance agent recommends an expensive endowment policy rather than a low-cost term policy.  I could go on, but I think you get the picture.  It’s a hostile world out there, with many solicitors operating on the time-honored principle: “Get ‘em once and get ‘em good.”

5.  How the future creeps up.  At some point in our lives, it dawns upon us that there are fewer years ahead of us than behind us.  When that time arrives, it’s reassuring to know that nothing will arise to prevent your continuing to live in the style to which you’ve become accustomed.  A most repeated statement of persons in their late 50’s and beyond is: “I never though I’d get here this soon.”  It’s for this reason that you plan for your retirement at the earliest age.  There must be no question that retirement accounts, whether they be IRAs, 401(k)s, or other private programs, be established, and funded, from the earliest working days.  In addition, funding should continue year after year, as though your future wellbeing depends upon it—for indeed, it does.

A final word on Franklin:  Although his emphasis on health, wealth, and wisdom makes sense, I’m not so sure about his early to bed and early to rise advice.  It apparently doesn’t increase longevity, for Ben, who died at 84, couldn’t match song-writer Irving Berlin, composer of Oh how I Hate to Get Up in the Morning, who made it to 101.

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Al Jacobs has been an entrepreneur for forty years. His business experience ranges from property management and securities investment to appraisal, civil engineering, and the operation of a private trust company. In his book, Nobody's Fool - A Skeptic's Guide to Prosperity, Al presents his Ten Ground Rules for Success for achieving wealth and a prosperous life by outlining a philosophy for spending, borrowing, making sound investments, and how to avoid being victimized by America's many intimidating institutions.