We haven't heard much about it lately in the media, but the idea of a golden parachute came from the tremendous severance packages chief executive officers of large companies would get upon leaving their respective companies.
We're talking about millions of dollars in cash, stock options, and anything else of any real value that they could throw at them.
When we had our major financial collapse last year, there was intense scrutiny on these CEOs who were being removed from their posts for, well, failing to do their jobs.
But, they still got crazy packages, golden parachutes if you will.
Today, we're not going to be talking about millions of dollars worth of stock options or an eight-digit lump sum of cash.
We're going to talk about how to utilize any substantial monetary gift you receive from family, friends, or circumstance for the betterment of your financial health.
Every month around this time, I have my federal student loan payment deducted automatically from my money market account.
Usually, my private student loan bill comes to my apartment at this time as well.
(I don't automatically have that deducted because the lender doesn't have the same level of online access the federal loan provider gives.
) Because of pay cuts, furlough days, and the expense of living right outside Manhattan, I can't set aside the full amount I have to pay per month for both of these loans.
OK, OK, you're thinking ...
isn't that breaking about 239847 of your tips, commandments, and principles? Well, not exactly.
My grandfather came across an opportunity to receive a rather large sum of money for a small piece of property.
He decided to put it into an account that paid him monthly.
In turn, he gave me monthly installments for my first two years out of college.
He'll now give it to my brother for a couple of years, and then my sister.
The amount is more than enough to cover my school loans -- and that was his intention for it when he decided to give this to us.
Now, it would have been very easy to say, "OK, well, my grandfather is giving me this money so I don't have to worry about setting aside money for loans for two years ...
par-tay!" I decided against that.
I realized that I would eventually move out of my parents' house when the right opportunity presented itself.
I also recognized that I would most likely have to stretch my paycheck to ungodly limits because of the area in which I work and now live.
So, I figured it would be difficult for me to set aside the entire payment without sacrificing for other essential items.
After my monthly payments dried up, then I'd have to be scrambling to cover the payments -- most likely tapping into my emergency fund, which would only perpetuate a vicious cycle of spending.
Consequently, while I lived at home, I decided to pretend I wasn't receiving any money for my loans and set aside the full amount in addition to what my grandfather gave me.
This way, I wouldn't have to worry about setting exactly exactly how much I needed.
I created a cushion for myself, assuming that in several years I will be making enough money that I can pay off even more than my monthly bill.
This has definitely come in handy now, since my paycheck quite frankly ain't what it used to be.
I set aside as much as I can for loans, but it doesn't cover the full amount.
But, due to my saving and creating a cushion for myself for two years, I have approximately $8,000 set aside specifically for my college loans.
If I didn't set aside another penny for my college loans, I could pay for at least two years.
I can't tell you how much this puts me at ease, and it was all really simple.
When I was at home, I had plenty of money to set aside because I wasn't paying for rent, food, utilities, internet, etc.
It just took some discipline (because trust me, I had plenty of discretionary things I wanted to spend my money on) and foresight to realize that I didn't want to hamstring myself once I did strike out on my own.
So today, if you are fortunate enough to be receiving (or have received) any large monetary gifts, look at how you are using it.
Compare that to the personal finance goals you've set for yourself and see if it matches up.
For example, say you have two primary goals right now: building up $5,000 in your emergency fund and paying off $3,500 in credit card debt.
You're just starting out, so you have nothing saved in your emergency fund yet.
If you have received, say, a gift of $7,500 ...
take $5,000 immediately and set it aside for your emergency fund.
Goal achieved; forget about it.
Take the remaining money and pay off $2,000 of that credit card debt.
That's a huge load off your shoulders, and a good start toward becoming debt free.
There's a lot to be said for enjoying yourself with gifts, and I believe that to be true.
But, sometimes you may have to sacrifice the short-term pleasure for a longer-term gain -- a better credit score, money in the bank, and overall better financial health.
Create a golden parachute for yourself today.
Having a cushion now is more important than ever.
We're talking about millions of dollars in cash, stock options, and anything else of any real value that they could throw at them.
When we had our major financial collapse last year, there was intense scrutiny on these CEOs who were being removed from their posts for, well, failing to do their jobs.
But, they still got crazy packages, golden parachutes if you will.
Today, we're not going to be talking about millions of dollars worth of stock options or an eight-digit lump sum of cash.
We're going to talk about how to utilize any substantial monetary gift you receive from family, friends, or circumstance for the betterment of your financial health.
Every month around this time, I have my federal student loan payment deducted automatically from my money market account.
Usually, my private student loan bill comes to my apartment at this time as well.
(I don't automatically have that deducted because the lender doesn't have the same level of online access the federal loan provider gives.
) Because of pay cuts, furlough days, and the expense of living right outside Manhattan, I can't set aside the full amount I have to pay per month for both of these loans.
OK, OK, you're thinking ...
isn't that breaking about 239847 of your tips, commandments, and principles? Well, not exactly.
My grandfather came across an opportunity to receive a rather large sum of money for a small piece of property.
He decided to put it into an account that paid him monthly.
In turn, he gave me monthly installments for my first two years out of college.
He'll now give it to my brother for a couple of years, and then my sister.
The amount is more than enough to cover my school loans -- and that was his intention for it when he decided to give this to us.
Now, it would have been very easy to say, "OK, well, my grandfather is giving me this money so I don't have to worry about setting aside money for loans for two years ...
par-tay!" I decided against that.
I realized that I would eventually move out of my parents' house when the right opportunity presented itself.
I also recognized that I would most likely have to stretch my paycheck to ungodly limits because of the area in which I work and now live.
So, I figured it would be difficult for me to set aside the entire payment without sacrificing for other essential items.
After my monthly payments dried up, then I'd have to be scrambling to cover the payments -- most likely tapping into my emergency fund, which would only perpetuate a vicious cycle of spending.
Consequently, while I lived at home, I decided to pretend I wasn't receiving any money for my loans and set aside the full amount in addition to what my grandfather gave me.
This way, I wouldn't have to worry about setting exactly exactly how much I needed.
I created a cushion for myself, assuming that in several years I will be making enough money that I can pay off even more than my monthly bill.
This has definitely come in handy now, since my paycheck quite frankly ain't what it used to be.
I set aside as much as I can for loans, but it doesn't cover the full amount.
But, due to my saving and creating a cushion for myself for two years, I have approximately $8,000 set aside specifically for my college loans.
If I didn't set aside another penny for my college loans, I could pay for at least two years.
I can't tell you how much this puts me at ease, and it was all really simple.
When I was at home, I had plenty of money to set aside because I wasn't paying for rent, food, utilities, internet, etc.
It just took some discipline (because trust me, I had plenty of discretionary things I wanted to spend my money on) and foresight to realize that I didn't want to hamstring myself once I did strike out on my own.
So today, if you are fortunate enough to be receiving (or have received) any large monetary gifts, look at how you are using it.
Compare that to the personal finance goals you've set for yourself and see if it matches up.
For example, say you have two primary goals right now: building up $5,000 in your emergency fund and paying off $3,500 in credit card debt.
You're just starting out, so you have nothing saved in your emergency fund yet.
If you have received, say, a gift of $7,500 ...
take $5,000 immediately and set it aside for your emergency fund.
Goal achieved; forget about it.
Take the remaining money and pay off $2,000 of that credit card debt.
That's a huge load off your shoulders, and a good start toward becoming debt free.
There's a lot to be said for enjoying yourself with gifts, and I believe that to be true.
But, sometimes you may have to sacrifice the short-term pleasure for a longer-term gain -- a better credit score, money in the bank, and overall better financial health.
Create a golden parachute for yourself today.
Having a cushion now is more important than ever.
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