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Springfield Business Journal Articles
Sarah Delano Pavlik and Tom Pavlik write a monthly column on legal and business issues for the Springfield Business Journal.


Their columns will be added here each month after publication.
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We all want to make money.  That's why we read the Springfield Business Journal – to help us make more money.  But do we ever stop to think about why, and once we make all this money what are we supposed to do with it?

We have all heard that money can't buy happiness (but I think most of us would like to research that for ourselves).  Of course there are examples everywhere.  Celebrities and other wealthy people get divorced, commit suicide and get arrested for crimes just like everyone else (maybe more so).  The stories of lottery winners going bankrupt, becoming alienated from friends and family and even being murdered are numerous.

So, what's the right anser?  According to financial consultant Denise Hughes, there are four things we should do with our money: earn, save, spend and give.  Likewise, Dave Ramsey's three principles are save, spend and give.

Earning is pretty obvious.  Ill gotten gains will not lead to happiness.  They may lead to prison, lawsuits or other negative consequences.  Hard work brings satisfaction and money.  I don't think I need to give you examples of people who don't work and have nothing to show for it.

Saving is also pretty obvious, but very difficult for many Americans.  According to The Economist, Americans saved just over 8% of their income in 1959, close to 12% in 1971 and down to just over 2% in 2013.  This is not a percentage of gross income.  Rather, it is a percentage of disposable net income – the income you have left over after you pay your taxes.

So, how much should you save?  Two of Dave Ramsey's baby steps to financial peace are having $1,000 in an emergency fund and three to six months expenses in a saving account.  Those are your minimum goals.  After these funds are in place, you will need to determine other savings goals – a down payment on a house, a new car, college, retirement, etc.

You can't save if you spend more than you earn.  No matter how much you earn, you can always spend more.  One example is Sharon Tirabassi.  In 2004 she was a single mother living on welfare,  Then she won over 10 million Canadian dollars in the Canadian lottery.  As reported in Business Insider , she spent her winnings on a big house, cars, clothes, parties, trips, handouts to family and loans to friends.  In less than a decade she is back riding the bus, working part-time, and living in a rented house.

Professional athletes are also good examples of over spending.  According to Munkneedotcom, "78% of NFL players, 60% of NBA players and a very large percentage of MLB players (4x that of the average U.S. citizen) file bankruptcy within five years of retirement."  Johnny Unitas (MLB), Sheryl Swoopes (WNBA), Dorothy Hamill (ice skater), Lawrence Taylor (NFL),  Michael Vick (NFL) and Steffi Graf (tennis) have all filed for bankruptcy.  (In their defense, most of them lost money on terrible investments, but they also spent a lot of it.)

Just as with spending, however, you can go overboard on saving.  How can money buy happiness if you won't spend any of it?  We all know the stories of Scrooge and the Grinch, but you may not know of Hetty Green and J. Paul Getty.

Hetty Green lived from 1834 to 1916 and was known as the "witch of Wall Street."  She inherited $7.5 million dollars and through investing turned it into $200 million (equivalent to over $4 billion today).  Despite her great wealth, she would not pay for heat or hot water and wore her clothes until they actually fell apart.  Hetty had two children.  When her son Ned broke his leg, she took him to the free medical clinic for the poor.  Probably due to her refusal to pay for proper medical care, Ned's leg had to be amputated.  She was equally stingy with herself, refusing to have a hernia operation because it cost $150.

You've probably heard of J. Paul Getty, the industrialist who made his fortune in oil.  In 1957 he was named by Forbes magazine as the richest living American.  When his sixteen year old grandson was kidnaped in 1973, he refused to pay the $17 million ransom.  Only after receiving his grandson's ear in the mail did he agree to pay $2.2 million.

The final use for money is to give it away.  It may not always appear to be so, but the desire to help others is fundamental to our human nature.  Across time and continents, we have been told to be charitable.  Confucius said, "The way of the exemplary people is fourfold. . . They are generous in taking care of people."  The Book of Proverbs in the Old Testament says, "Charity begins at home, but should not end there."  Alexander the Great said, "In faith and hope the world will disagree, but all mankind's concern is charity."  The Koran says, "You will not attain righteousness till you spend in charity of the things you love.”  Horace Mann said, "Doing nothing for others is the undoing of ourselves."  Martin Luther King, Jr. said, "Life's most persistent and urgent question is, 'What are you doing for others?'"

Your reasons for giving may be religious, moral or otherwise, but giving will improve your life as well as the lives of others.  Abraham Lincoln put it well, "To ease another's heartache is to forget one's own."  Dave Ramsey says, "Giving liberates the soul of the giver.  Whether through a tithe, charitable contribution, or gift to a friend in need, give away at least some of your money.  Not only does it generate good feelings, but it generates contentment."

If you want to be charitable but don't know where to start, look through the rest of this month's issue.  You'll find information on several non-profits in our community.  Maybe one will be right for you.
Posted in: September, 2014
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