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Why Kelly Rutherford’s bankruptcy should make you more prudent about your finances

Celebrities, Gossip

Kelly Rutherford is an actress. Not just an actress, but a working actress. She is not a familiar looking extra or an actress who Kelly Rutherfordfrequently guest stars on television, but someone who has appeared as a series regular on multiple high profile shows since the 1990s. She recently ended a six-season run on the CW hit “Gossip Girl.” This all makes the recent revelations of her bankruptcy that much more surprising. How does someone who has made it in an ultra-competitive, well-compensated field end up with over $2 million in debt? There are several lessons that we can learn from Kelly Rutherford’s unfortunate bankruptcy.

1. Divorce not only has an emotional cost, but can also have a steep financial cost The vast majority of Kelly Rutherford’s debt is related to her divorce and custody battle with her ex-husband German businessman Daniel Giersch. The legal battle with her ex-husband has cost her over $1.5 million.If you are considering getting a divorce, be cognizant of the fact that divorce proceedings may end up being expensive. Between attorney fees and court costs, your expenses can quickly ramp up. Try to have an objective assessment of how you expect the divorce proceedings to go. Do you expect the divorce to be amicable or acrimonious? If you have children, do you expect that you and your spouse will battle for custody? Do you have a plan in place to divide the marital assets? The more questions you can answer and plan for before divorce proceedings occur, the better chance you will have of keeping your costs down.

2. Have a plan for paying your taxes

In addition to the $1.5 million in legal fees, Kelly owes $350,000 in income tax for 2012. For the majority of us, paying taxes is simple. Your company automatically takes deductions out of your paycheck that pay for your income tax.

If you are a contractor or self-employed, it’s important to remember that not all the money you earn is yours. Make sure to set aside a certain percentage of each paycheck that you will use to pay your taxes at the end of the year. Try to estimate your expected income and taxes for the year and set up a separate account that you can use to settle your tax bill. If possible, get some guidance from an accountant on how to pay your estimated taxes quarterly.

3. Set up an emergency fund

Kelly works in a profession in which rapid changes in income are quite common. One month you are earning $40,000 per month for being on a hit show, the next month your character is written off the show or the show comes to an end and you no longer have any income coming in. In any field in which income tends to drastically change, it is especially important to set aside an emergency fund to help account for the uncertainty in income stream.

While the majority of us likely have more certainty about how much we expect to earn in the future, it is still important to set aside some funds in an emergency account. Whether you are an actor or an office worker, there is always some uncertainty about the future, and having an emergency account can make it easier to ride the ups and downs as you encounter them.

While Kelly Rutherford’s bankruptcy is sad and alarming, there are lessons we can derive from it to make us all more prudent about our financial future.

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30 Day Project Summary – January

Misc

This month, I had two 30 Day Projects: Get up at 5am and read to my kids before bed every night.

Getting up at 5 wasn’t as hard as I had feared. I’ve never been a morning person, but this was nice.  I got a chance to wake up slowly, catch up on the world, make breakfast and get to work without feeling rushed.  Those are all good things.   I missed twice.  The first time, I rolled over to get out of bed and didn’t make it.  Somehow, I got stuck halfway through rolling over.    The second time, I was up until after 2AM talking with my wife.  I won’t give up that kind of quality time.  When the alarm went off at 5, I gave myself two more hours.

The really interesting part, at least to me, is that I didn’t go to bed earlier most nights.   This actually added an extra 90 minutes to my day. I’m going to keep this habit up.  I may not be as firm about it every day, but it’s going to be my regular habit.  No more snooze alarm, no more wasting half of my day in bed.

Reading to the kids was harder.  Wrestling season started this month, which means we spend a lot more time chasing around to get our 10 year old where he needs to be.  After the first week, the bedtime requirement went out the window.  I decided to read to the girls whenever there was time, which made it work better.  We chose practicality over strictly adhering to the letter of the goal.  Over the course of the month, I missed 5 nights which isn’t too bad.

“Get a book” has turned into one of my girls’ favorite things to hear.  They both run giggling for the bookshelf.  It’s quiet time.  It’s quality time.  It’s teaching them to enjoy one of my favorite activities.    Never turn down an opportunity to read to a child. It may be the only time they sit still all day and the experience will stick with both of your forever.   The little things matter. A girl’s head on each shoulder and a book in front of us is something is something I will treasure forever and something that I am going to work to continue.   I only have a few more years before they are reading on their own and won’t need Daddy for this anymore.

30 Day Project – July

Life

Hannah Montana
Image via Wikipedia

My 30 Day Project for the month of July is to write.  Every day.

Originally, it was going to be specifically to write fiction every day, but I’ve decided to change the rules.

I am going to write at least 500 words every day.  That isn’t much, just a page or so.  It may be fiction, it may be blog posts, it be other articles.  Heck, it may even be an epic Facebook update!   Some of the writing will be posted here, some will be submitted elsewhere, hopefully for pay.   Some of it will live on in my personal archives, for cyber-archeologists of the future to one day uncover and use to determine that we all trying to build a jetpack that is cleverly disguised as a Hannah Montana moped.   All of the writing will be original.  There will be no rewritten or spun articles.

My tools?  Clay tablets and a heavy stylus.   Err….my computer for most of it, pen and paper for some of it, my blackberry for anything that strikes me while I left the good tools at home.

Why am I doing this?

I want to be a better writer.  I’ve always had things to say and stories to share.  I’ve rarely had the discipline to actually share them.  I want to build that discipline, even though I’ve already missed two days this month.

I also want to develop my personal style–my voice–in a way that can only happen with experience.  You get better at writing by writing, not reading about writing or thinking about writing.   Putting pen to paper is the only way to improve your style and develop your voice.

So that’s what I’m going to do.

Becoming a Landlord

Business, Finance

For those of you just tuning in, my mother-in-law died in April.

Since then, we’ve spent nearly every available moment at our inherited house, digging out and cleaning up.

My mother-in-law was a compulsive hoarder.   I’m not going to get into the details of her compulsion, but we have–so far–filled a 30 yard dumpster.  For perspective, that’s big enough to fit our Ford F150.

Now that the house is approaching the point where we can begin updating and remodeling, I’ve been looking into the requirements to rent it out.

In my city, I need to get a business license that costs $95 per year.   This comes with a requirement to allow the city to inspect the property every two years.

Before they will issue the license, I have to take an 8 hour Minnesota Crime Free Multi-Housing Program class that covers tenant screening, lease addendum, evictions, and “etcetera”, followed by a physical audit of the property to ensure minimum security standards.

The lease addendum basically reads “If you are loud, obnoxious, threatening, criminal, intimidating, or doing/dealing drugs, you will be evicted.”

The actual costs to become a landlord are going to be:

  • Something under $100 for my wife and I to take the landlord class.  The price varies from free to $40, depending on the hosting city.
  • $95 per year for the privilege of using our private property to conduct a private transaction with a private individual.
  • The remodel.  I don’t know what this is going to cost, yet.   There’s an unfinished bathroom in the unfinished basement.  I’d like to finish both of those, though the basement will never hold a 3rd bedroom, due to code.  The entire house need to be painted and have the trim replaced.  The dining room and hallway have hardwood floors, hiding under linoleum that was never properly put down.   We may need new windows.

If possible, I’d like to keep the project under $20,000.   Since we’re not adding a 3rd bedroom, or tearing out the kitchen cabinets, it should be possible.

In the meantime, expect to see a bunch of remodeling and renting related posts coming up.

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Counting Cards: How to Cheat At Blackjack

Finance

A blackjack game in progress
A blackjack game in progress (Photo credit: Wikipedia)

I don’t gamble much.  I’ve got this boring kind of luck that let’s me gamble for a really long time on not much money, without ever winning big.

For example, when my wife was very pregnant with our first monster, we took a trip to visit my parents.  It’s a 2 hour drive, and she needed a break halfway there.  In the truck stop, we bought $5 worth of scratch-offs to pass some time.   We turned in the winning tickets for more scratch-offs.   And again.   And again.   Two hours later, we were out of winners, but had never accumulated more than $10.

Another time, we went to the casino to play slots.   It took nearly 8 hours to spend $20.   That sounds boring, but we had good conversation while we were playing.

I’ve never had a big win or a big loss from gambling, so I’ve always been kind of bored with the idea.

Now, cheating at blackjack, that’s a different matter.  Pulling one over on the casino without getting caught…they make movies about that kind of stuff.

To be clear: counting cards in your head isn’t cheating.   Legally, the worst that can happen is you can be asked to leave.   To get a Hollywood-I-cheated-the-casino-and-got-caught-and-beat-by-the-mob kind of beating, you need to win a lot.

A lot.

To get started, there are a few things you need to know.  One of those things is how to play blackjack, but I’m not going to get into the basics.  If you don’t know how to hit, stand, or count to 21 without taking your clothes off, this guide may be too advanced for you.  Come back later.

Super Basic Strategy

You don’t need to count cards to use this strategy.   You will do better than most players if you follow along.

1.  The dealer must hit, or take another card, if he has 16 points.  If he has 17, he stands.

2.  The hole card–the card you can’t see–is always worth 10.  Of course, it’s not, but for the purposes of your strategy, assume it is.

That means, when the dealer is showing a 2, you’ll assume he’s got 12 points and will hit.  If he’s showing a 7, you’ll assume he’s going to stand.   If he’s showing an 8, your goal is to beat 18, not push for 21.

That’s it.  If you do that, you’ll come within a couple of points of even odds against the house.  Google “blackjack basic strategy” if you want to improve this.

Even odds isn’t good enough.

Card Counting

Counting cards sounds tough.  Rain Man tough.

It’s not, but you’ll want to practice at home a bit before you try it in the really real world.

The rules are simple:

1. Cards 2-6 are worth 1 point.

2.  The 10, jack, queen, king, and ace are worth -1.

3.  For every card that is played, keep track of that score.   This is a running score across multiple hands until the deck is replaced or shuffled, so don’t stop at a new deal.

4.  Divide the running score by the number of decks remaining in the shoe.  If there are approximated 150 cards in the dealer-thingy, that’s 3 decks, so divide by 3.   If your running score is 18, that means the number your playing against is 6.   If the casino is using a continuous-shuffling thingy, forget counting the cards.

That’s it.   You’re never adding or subtracting more than a one, and you’re doing that against a number that tends to stay pretty low.

How do you use that, you ask?  Easy.

When the score is up, bet higher.  If it’s low or negative, bet lower.   The higher the number, the higher your bets.   If you’ve got a 5, a 6, or more, bet as much as you are comfortable with.  If your playing score is low or negative, bet close to the table minimum.

Why does this work?

A higher score indicates that the main assumption of the super basic strategy is more likely to be true.  When you’ve got a score of 10, you know a lot of lower-value cards have already hit the table, so it’s safer to assume that the dealer’s card is worth 10.

You don’t change anything about the way you play each hand, you just change the way you bet each hand.   Counting cards doesn’t tell you specifically what’s going to happen during each hand, it just tackles the statistics of the game.  It moves the odds in your favor, by up to 2 or 3 percent.    Over one hand, this won’t help, so don’t sweat losing a hand here and there.   Over an entire shoe of hands, you should be able to steadily win more than you lose.

And, as Brian Brushwood says, in the course of your life, very few things make a cooler story than getting kicked out of a casino for counting cards.

Do you play in casinos?  Ever tried to cheat?

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Changing Our Situation

Finance

In September 2005, I bought my car, a Chrysler Pacifica.  I got it on a loan.   Two months later–seven years ago this month–I was told I’d be laid off at the end of the year.

Two weeks ago, we bought a Chevy Tahoe with a loan.   Last Monday, my wife was permanently laid off after 12 years with her company.   She was told that, if her department opened back up, she’d be welcome to reapply for her job and start as a new employee.

Car loans mean layoffs at my house.

Last Tuesday, I got a formal offer for a new job.  I accepted.

I am now a full month away from knowing exactly what my semi-monthly paychecks will be.  My wife is getting her final paycheck later this week, which will include a week of severance pay.

For the first time in a number of years, I don’t know what my income looks like.   I don’t have a clear long-term picture or a good short-term picture.

I’m not worried.

For the first time in my life, I’m not living paycheck-to-paycheck.  Having a couple of pay periods act wonky isn’t going to hurt.   Yes, we are going to cut back, but we can manage for a few months without worry.  We aren’t going to sweat over putting food on the table.

That is an incredible feeling.