Parnassa is truly a gift from Hashem. Each morning, in Ashrei, we recite, “posai’ach es yaodecha – You open Your hand to satisfy all the living.” In Shemoneh Esrei, we ask Hashem to “satisfy us from Your bounty.” On motza’ei Shabbos, we ask Hashem for dew from Heaven to give us the fatness of the earth and plenty of corn and wine. We ask for parnassa in Avinu Malkeinu, as well as in the blessing on Rosh Chodesh, the new month. In the bentshing, too, we thank Hashem for our bread, while asking for sustenance, blessing, and success.
No matter what our financial position – barely holding on or blessed with largesse – we must always recognize that it is Hashem’s money with which we are entrusted, given to us to manage properly. We must be same’ach bechelko, happy with our lot, and do our hishtadlus, make our best efforts, to support ourselves and our family. That includes crafting a sound financial plan.
Before I start with some ideas for doing that, let me issue an important disclaimer: I am not a certified investment counselor. I am a businessman, and many families in our community and some local businesses have sought my financial opinions. The advice I give is based solely on my many years of experience in business, investments, as well as the common sense I have learned on the way. Truth be told, I learned much from my grandparents and parents, as well as from college, when I earned my undergraduate degree in Business Administration. As a company CEO who employed many in our community, I also learned a great deal in the workplace. I am happy to counsel and share this advice to those who seek it.
Seeking Professional Expertise
Every investor, anyone with savings, and all homeowners, working or retired, should surround themselves with qualified financial consultants. It is a mistake to think that only the rich need financial advice. Anyone who has an income and/or assets needs an accountant, a lawyer, and a financial counselor, who will make sure that all legal and financial issues are properly addressed.
Taxes, estate planning, wills, trusts, titling a home, contracts, IRAs, investments, and insurance policies require legal and financial expertise, and you should seek out the most competent and reliable individuals to give you sound and easy-to-understand advice. If you come across any kind of contract or application, let your professional team review it and recommend how to proceed. Remember, the fellow who is trying to sell you that annuity or the stockbroker who is selling you an investment are getting a healthy commission. So beware, and always check with someone who is independent of the product you are considering purchasing.
Money Management Begins Early
A child’s financial education should start early. A tzedaka box in the home and a piggy bank in the bedroom are important financial instruments, even at a young age. At seven or eight, it is time to put the child on a small allowance to be used for an occasional treat at the school canteen, while a portion should also be put aside for tzedaka. Even a small allowance teaches the child valuable lessons, such as saving, spending wisely, and sharing with others. The child can be rewarded by increasing the allowance once a year if he or she shows responsibility.
Before a bar or bat mitzva, consider opening a savings or checking account at a local bank, taking the child with you when you open it. If a child shows financial interest, suggest using some of their simcha gift dollars to purchase a mutual fund. Or help them buy shares of recognized, stable companies on the stock exchange. Research the companies together and purchase companies the child may know, like Cocoa Cola, Nike, Apple, General Motors, or a bank or utility. This is a great way to get a child interested in finances at a young age.
A Credit Card Warning
A year before leaving for yeshiva, seminary, or college, have the young student apply for a credit card through you. Monitor the activity on the card very closely and discuss transactions with the teenager. Clearly teach the number one rule of credit cards: If you can’t pay it off each month, don’t use it. Credit card misuse by teenagers and, later, by newly married couples is a huge problem. I too often sit with young couples – and even with couples in their 30s, 40s, and 50s – who find themselves in tremendous credit card debt. Proper credit card behavior needs to start at a young age. Children and adults must clearly understand that a credit card is only for convenience, to avoid having to use cash; it should never be used as a loan vehicle. You should never carry a balance, as interest rates can be anywhere from 12 to 24 percent if the card is not paid off monthly. Managing a credit card account responsibly is crucial.
Many students take on loans to complete their education. This may be a good investment, but be careful. Realize that these loans will one day have to be paid back. Before taking out the loan, make sure you have a plan to pay it off once you get a job. Too many people are paying back those student loans for too many years. Even if a person declares bankruptcy, student loans must be paid. How America’s one trillion dollar student loan debt will be paid back is a serious concern to economists, who are fearful of many likely defaults.
I feel that, before he agrees to officiate at a wedding, a mesader kiddushin needs to make sure the chassan has a secured a term-life insurance policy and a good healthcare plan – one that includes pregnancy and dental coverage. I also recommend a minimum of $300,000 of life insurance, increasing it by $250,000 for each baby. A good insurance agent can get inexpensive term insurance. It is important to secure that insurance at a young age, when you are in good health. Try to get a rider that guarantees your right to purchase additional insurance, regardless of health, at specific times, like at the birth of a child or by a certain birthday.
You need to carry insurance at least to the time the children leave the home and are self-supporting. If mom is the main salary earner, consider insurance on her as well. Insurance will also be needed for the surviving spouse if, G-d forbid, such a situation arises. A term policy of 20 or 25 years may not be enough. Look into possible convertible policies that are either “whole life” or universal adjustable premium contracts. Later in life, you need to look at the tax implications; if you have amassed considerable assets, insurance can be used effectively for estate and planning purposes. Seek advice from your accountants and estate lawyers.
More Insurance Coverage
As you approach the age of 50, consider purchasing long-term care insurance. Make sure it covers care not only in a nursing home but also by an assistant in your own home. This is an important financial insurance for later life. During the working years, disability insurance is a good idea. If you are thinking of making aliya in the future, make sure your long-term care and disability policies pay benefits overseas.
Both health and disability are sometimes available through the workplace. Apartment insurance for the contents of a rented apartment and a homeowner’s policy upon buying a house are always important. Of course, car insurance is mandatory. And for one who has amassed assets, an umbrella coverage of $300 to $500 thousand should be considered. You can clearly see how important it is to have a reliable, knowledgeable insurance agent for all sorts of insurance advice.
Planning for Marriage
Having a clear understanding and well thought-out plan for parnassa (livelihood) is essential to a happy marriage. A chassan and kalla need to consult their parents and daas Torah regarding kollel and how many years to continue that important learning derech. Many couples intend to learn for five years or more after marriage. They need to look down the road to what will happen after those years, and determine whether they have the resources to maintain a secure lifestyle.
Assuming they get financial help from their parents, the young husband and wife need to be aware of how many years they can rely on such help. A good financial plan and advice from family and daas Torah are most important. Too many young couples do not plan properly and instead rely on credit cards or unrealistic loans to keep from drowning financially. They incur impossible debts they will be unable to repay, jeopardizing their financial future. Ultimately, the most essential thing is for the husband and wife to be honest with each other, speak openly, and communicate.
As you build your family, iy”H, financial demands will increase. A healthy shalom bayis is one that is free from continuous financial stress. Consideration must be given, as well, to the future demands on one’s time and energy that come with raising children, especially on the mom. It is very important to not overload the wife. Keeping the home, raising the children, and being in the workplace can be a real challenge.
One important consideration is how much one can afford to pay for an apartment rental or home purchase. My recommendation is to allow up to 25 percent of family income to pay for housing. If you buy an inexpensive condo, be mindful of recurring condo fees. If you purchase a home, hire a reliable home inspector to discover any problems, such as water issues, doors and window, roof and foundation repairs, and HVAC air and heating system concerns. Check property taxes and BGE history to know exactly what to expect.
In pursuing employment, look for a job that provides a good steady income, reasonable working hours, and health benefits and other perks. Make sure it is an atmosphere you will enjoy and a position you will be proud of. If you are fortunate to find such a position, work hard and be loyal to your company. Hopefully, your productivity will help advance your responsibilities and offer increased financial reward over time. It is important to set up a retirement or IRA as soon as you can.
Jobs that are paid on commission usually do not present the employee with a steady income stream, making it difficult to manage cash flow and budget properly. Too often, skilled people start their own business, thinking they can earn more. That’s only true if the person has the proper business acumen to run the business. Not everyone is cut out to run a business; sometimes, being employed and managed is a very good thing. With a set income stream, it’s easier to plan and come up with a realistic budget.
To be continued.