“Houston We Have a Problem”: 3 Financial Lessons from Apollo 13

Gene Kranz Apollo 13 SMRemember that famous line from the 1995 film Apollo 13: “Houston, we have problem.“? I have been feeling like that at work recently. Things have been a little busier than usual with my project and it seems that at every turn, there is a new major problem to solve.

So the movie has been on my mind a lot. If you recall, the Apollo 13 mission was supposed to get another crew to the moon. On the way there, a problem surfaced with the space vehicle and the issue was no longer getting the men to the moon, but getting the men safely home.

My favorite character in that movie is NASA Flight Director Gene Kranz played superbly by Ed Harris. Gene was the one person who kept everyone on an even keel and focused on the problem at hand even in the midst of the crisis. I think his leadership had a lot to do with the successful resolution of the situation.

When you think about your finances, do they resemble the Apollo 13 mission? Too much month left at the end of the money, mounting credit card debt, high car payments, no savings, no plan for the future. If this is you, I know how you feel because I have been there.

So let me share with you 3 Financial Lessons that we can learn from Apollo 13 based on my favorite Gene Kranz’s lines:

1. “Let’s look at this thing from a… um, from a standpoint of status. What do we got on the spacecraft that’s good?”

In the movie, when the crisis surfaced everyone in Mission Control went into a panic. It was Gene who brought everyone to a point where they could focus on the issues. When you face the problem with your finances, you have to start where you are.

For example, Don’t panic about what seems to be an insurmountable debt or the fact that you don’t have much saved for retirement. Think about what’s working. Do you have a job, an income? Good. Can you and your spouse discuss money openly? Great. Are the cars running? Excellent! You can get back and forth to where you need to go. Are the utilities paid? Can you put food on the table? Fantastic. You can live to fight another day.

Focus first on the priorities of life and then on establishing control one step at a time. Get on a budget. Build a beginner’s emergency fund. Focus on paying off your smallest debt. With these building blocks you can get control of your financial situation.

2. “We’ve never lost an American in space, we’re sure as hell not gonna lose one on my watch! Failure is not an option.”

Gene did not let his team lose hope. They could not think about failure because he did not allow for that option. You need to make it clear to your family that winning with your finances is your only option. They will take their lead from you so you need to lead with hope.

Your attitude should be that you will do whatever it takes to achieve victory. You will sacrifice, you will work extra hours or take a second job. You will take your lunch to work. You will sell some assets to build your savings or to pay debt. Don’t give yourself the option of failure because if you do, you will fail and so will your household.

3. “With all due respect, sir, I believe this is gonna be our finest hour.”

Finally, when Gene’s superiors were thinking about impact of the possible disaster on NASA, he reaffirmed his belief in his team and the fact that they would rise to the present challenge.

It does not matter where you are with money today. It does not have to stay that way. You and your family can have a fantastic tomorrow and you can change the direction of your family for generations to come.

We all have made mistakes with money. The question is, what are you going to learn from them and what will you do to make your tomorrow your finest hour?

What change will you make with your finances to start the journey towards a better tomorrow for your family?

5 Financial Products That I Avoid

No ThanksTeaching and coaching involve sharing knowledge on how to do certain things. In the case of personal finances I usually focus on the  method for doing something with your money like how to do a budget or how to get out of debt.

But it is also important to share what not to do with your money so you can keep more of it! So today’s coaching post is devoted to what products to avoid in your financial plan.

Here are 5 Financial Products That I Avoid:

1. The Single Stock

I believe investing in the market it’s a great idea. Once you have your financial household in good shape, you should be investing for long term goals such as retirement/college savings and also to build wealth. However, I do stay away from the single stock purchase and focus instead on diversification by investing in mutual funds.

A mutual fund is an investment where thousands of people combine their money to purchase a wide diversity of stocks, bonds or other types of investment. I invest in 4 types of stock mutual funds, so that’s diversification on top of diversification. If all your money is one single stock or only in one type of investment fund, your risk is too high.

2. The 30-year Mortgage

30 years has been the standard length for a mortgage loan. There is not much rhyme or reason to it except that someone a long time ago decided it was the right length of time. However, you can save a lot of interest by using a 15-year or 20-year mortgage instead. With interest rates as low as they are today, the difference in the monthly payment is not that significant but the savings in interest are.

We chose a 15-year mortgage for our home and we are paying extra so we are planning to pay it off early.

3. Extended Warranties

When you purchase a home appliance or a piece of home electronics, you will be met at the register with the offer for an extended warranty for 2-3 years on top of the standard warranty. The sales pitch is that the warranty will cover the costs of replacing or fixing if the item breaks. However, you are better off using your emergency fund to cover the replacement costs in the eventuality that something does break down. There is no need to pay extra for the “protection”.

And frankly, if the equipment is that fragile that it could break inside of 2-3 years, maybe you should be looking at a different brand.

4. The Home Warranty

Here the sales pitch is to address a “major” item such as the furnace or a major plumbing/electrical repair. When we purchased our home about 2 years ago, the previous owners had an existing home warranty so it came with the house. We tried to use it one time and on top of the annual fee of about $500, we had to a pay a service call fee of $75 for someone (of their choosing) to just come and look at the problem.

We canceled the home warranty the next year because it was not worth it. Instead plan for home repairs with with an emergency fund.

5. Whole Life/Universal Insurance

If you have anyone depending on your income, you need to make sure they will be taken care of in case something happens to you. However, the whole life/universal type of policy it’s too expensive.

Your best value is to have 20 to 30 year Term Life insurance. You can get better coverage for less money. The monthly savings can be used for paying down on debt, savings, or investing.

What do you think? Have you used any of these products? What has been your experience? Are there any other financial products you avoid?

Presione aquí para la versión de este artículo en Español.

5 Productos Financieros Que No Uso

No GraciasLa enseñanza y el entrenamiento implican el intercambio de conocimientos sobre cómo hacer ciertas cosas. En el caso de las finanzas personales por lo general mi enfoque es en el método para manejar tu dinero, como por ejemplo cómo hacer un presupuesto o cómo salir de las deudas.

Pero también es importante hablar sobre lo que no se debe hacer con tu dinero. ¡Así puedes retener más del mismo! De modo que nuestro articulo de hoy está dedicado a cubrir los productos que debes evitar en tu plan financiero.

Aquí están los 5 Productos Financieros Que No Uso:

1. Las Acciones Individuales

Creo que la inversión en el mercado es una gran idea. Una vez que tienes tu situación financiera en buen estado, debes invertir para metas a largo plazo, tales como ahorros para la jubilación / de la universidad y también para acumular riqueza. Sin embargo, debes mantenerte alejado de la compra de acciones individuales y debes concentrarte en la diversificación mediante la inversión en fondos mutuos.

Un fondo mutuo es una inversión, donde miles de personas combinan su dinero para comprar una gran variedad de acciones, bonos u otros tipos de inversión. Personalmente, yo invierto en 4 tipos de fondos de inversión en acciones, por lo que es la diversificación sobre diversificación. Si todo tu dinero está invertido en una sola acción o en un sólo tipo de fondo mutuo, el riesgo es demasiado alto.

2. La Hipoteca a 30 años

30 años ha sido la duración habitual de un préstamo hipotecario. No hay mucha rima o razón para esto, salvo que alguien hace mucho tiempo decidió que era la longitud correcta de tiempo. Sin embargo, puedes ahorrar un montón en pagos de interés mediante el uso de una hipoteca a 15 años o de 20 años en contraste. Con las tasas de interés tan bajas de hoy día, la diferencia en el pago mensual no es tan significativo, pero los ahorros en intereses si lo son.

Nosotros elegimos una hipoteca a 15 años para nuestra casa y estamos pagando extra cada mes por lo que estamos planeando para pagarla antes del plazo.

3. Garantías Extendidas

Cuando compras un electrodoméstico o una pieza de equipo electrónico para el hogar, te van a esperar en la caja registradora con una oferta de una garantía extendida por 2-3 años sobre la garantía estándar. El argumento de venta es que la garantía cubrirá los costos de sustituir o reparar el producto si se rompe. Sin embargo, es mejor para ti que uses tu reserva de emergencia para cubrir los costos de reemplazo en la eventualidad de que algo se rompa. No hay necesidad de pagar más dinero por el producto.

Y, francamente, si el equipo es tan frágil que podría romperse dentro de 2-3 años, tal vez debes buscar un producto de marca diferente.

4. La Garantía de Casa

Aquí el argumento de venta es enfrentar un problema grande como el equipo de aire acondicionado, o una reparación mayor de electricidad o plomería. Cuando compramos nuestra casa hace aproximadamente 2 años, los dueños anteriores tenían una garantía de la vivienda existente, de modo que venía con la casa. Tratamos de utilizar una sola vez y encima de la tasa anual de alrededor de $500, tuvimos que pagar una cuota para cubrir la  llamada de servicio de $75 para que alguien viniera apenas para ver el problema y hacer un estimado.

Cancelamos la garantía de la vivienda el próximo año, ya que no valía la pena. En lugar de eso, cuando tenemos que cubrir reparaciones en el hogar, lo hacemos con nuestra reserva de emergencia.

5. Seguro de Vida Universal

Si tienes a cualquier persona que dependa de tus ingresos, debes asegurarse de que serán atendidos en caso de que algo te suceda a ti. Sin embargo, el tipo de seguro universal (“whole life”) es demasiado caro.

Tu mejor opcion es un seguro de vida a plazos (“term life”) de 20 a 30 años. Puedes obtener una mejor cobertura por menos dinero. Los ahorros mensuales pueden ser utilizados para reducir las deudas, para ahorrar o para la inversión.

¿Qué te parece? ¿Has utilizado alguno de estos productos? ¿Cuál ha sido tu experiencia? ¿Existen otros productos financieros que debemos evitar?

Click here for the version of this post in English.