guest post: a Tashkent New Year

Note: I asked my wife, Bubelah, to write a guest post on any topic she wanted. She chose to write about winter holiday traditions from her childhood, so a little bit of background is in order. She was born and raised in Tashkent in the Uzbek Soviet Socialist Republic of the former Soviet Union. Until the Soviet Union dissolved (when she was 13) she lived in a Soviet Republic as a third generation Russian immigrant. In Russian (and for the most part Soviet) tradition, New Year’s Eve is far more significant than Christmas or Hanukah or any other winter celebration. New Year’s Eve is a huge family celebration and in some senses is hard for Westerners to understand – for Americans, imagine the 4th of July, Thanksgiving and Christmas all rolled into one day. It is extremely significant! So here is her take on the holiday!

soviet era new year postcard

My husband Steve asked me to write a guest post for his blog. I decided to write about winter holidays and traditions, the way it was done in my family. I am not going to write about how to save on holiday gift purchases. This topic has been covered more than enough. And it’s not about how to make money either. It’s about holiday joy and the traditions that are part of a happy and balanced life.

The holidays are approaching and for everybody it means different things. Now that we have our own little family I am constantly thinking of what traditions to incorporate into our holiday celebration. For Steve and his family, Christmas is a big holiday but not from a religious point. For me and my family the New Year celebration is a big deal. This is my favorite holiday of all.

When I was growing up we had almost the same routine every year – not that it was intentionally established, it just happened like that. My parents would buy a big fir tree that we, the children, got to decorate. Nothing sets the mood like the smell of a fresh tree. My mother would buy oranges and tangerines for a big treat because they were hard to get in winter.

I do not remember that we ever worried about buying or making presents for the New Year. We just never did it in my family, although my parents would always bring home small cute packages of treats for me and my sister. My parents’ employer provided them with presents for their children for a small nominal fee, and in that little cute bag we would find edible treats like holiday cookies, chocolate candies and such. We used to put them under the tree and eat our treats slowly..well, it least it was the idea. It never worked with me, but my sister had good discipline.

In America, children go to a big mall to see Santa Claus and they stand in a long line and wait for their turn to sit on Santa’s lap and tell him what they want. We, however, didn’t have malls. We had community clubs or theaters where you could go for free or for a nominal fee to see Father Frost (Ded Moroz) and his granddaughter Snegurochka. There was always a small performance and children gathered in a big circle around the Tree singing and dancing. This is what our parents arranged for us to do every December leading up to the New Year.

The New Year’s Eve feast was a big production. We would cook enough food to last us probably up to two weeks after the holiday. The idea was that your New Year’s table should be full and abundant to invite an abundant year into your lives. Special dishes were thoughtfully prepared with advanced planning involved, dishes that we wouldn’t have normally have eaten during the year. After all, the New Year’s Celebration was not some ordinary holiday.

New Year’s Eve was always considered a family celebration. That is why we spent it home or in going back and forth between our house and my grandmother’s, who lived next door. Sometimes if it snowed, we’d go out with sleighs and play in the snow. There would be a lot of neighbors outside doing the same thing. It would make our New Year’s celebration extra special.

Our big table that we set out on December 31 would not been folded for at least a week because the celebrations kept going on. There was always somebody who dropped by to wish us Happy New Year, be it a neighbor, family or friends. Of course we would invite them to the table to eat and drink champagne to toast the New Year, and that is what I liked about it the most, even after so much preparation leading up to the big culmination – there was no sudden stop to it.

This is what makes me sad about Christmas in America. It always feels that come December 26th, everything suddenly drops. All the anticipation and planning for the holiday for a whole month abruptly ends and you start seeing “SALE” signs everywhere.

Well, this is how my holiday celebration used to be, and this is how we are still doing it in America. I am thinking of making my own family holiday traditions. I do associate winter holidays with cold weather and snow. I cannot possibly go to the Caribbean to celebrate the New Year. It’s just something I grew up with.

Happy New Year to All. May the Year of 2008 bring you much Love, Health and Great Returns on your Investments!

shifting tastes

louderthanbombs What makes someone who loved "Louder Than Bombs" by the Smiths in the 80s listen to Madeleine Peyroux in 2007? 

Here is a proposal:  there are three types of music lovers.  One loves music in general, and their tastes evolve with the times.  Another loves a specific type of music, and sticks to that type of music over time.  The third starts out listening to popular music but drifts off as they get older into calmer music (shifting from Public Enemy to Kenny G would be an extreme example).

The first may have listened to the Beatles in the 60s, the Eagles in the 70s, the Smiths in the 80s, Pearl Jam in the 90s and now listens to the Killers (that would be a pretty amazing evolution for someone in their mid-to-late 40s).  The second type listened to the Beatles in the 60s, the Wings in the 70s…and then the Beatles again for the last 30+ years.  The third type listened to Cream in the 60s, but by the 90s they were put off by grunge and now listen to Sarah McLachlan or Miles Davis or even Vivaldi.

I suspect most people get stuck on the music of their youth OR slowly regress to calmer music over the years.  It’s fairly rare (although not impossible) to see someone in their 50s who is listening to Kanye West or Kid Rock.  At the same time, all you have to do is check out the charts to realize that there’s STILL a big market for the Eagles, or Bruce Springsteen – and while a lot of younger people may be listening to them, many of their listeners probably are a little older.

What does this listening behavior tell you about that person’s behavior in general? Does someone who listens to cutting edge music have a more risk-tolerant nature?  Would they be more likely to be single, or live in big cities or have more creative careers?  Do you think that people whose musical tastes soften become more conservative politically or in their behavior?  Is any of this reflected in how they treat their finances?

I really have no idea, but I suspect there is some correlation.  I have become much more conservative in my lifestyle over the last ten years – getting married, settling down, having kids and so on.  I know you might argue that none of that drives becoming more conservative in your attitude and behavior, but it does.  My musical tastes have shifted, too.  I used to listen to goth-kid stuff in the 80s:  Cure, Smiths, Depeche Mode.  In the 90s I listened to grunge but when it was time to go to a concert or buy a CD I chose REM and Dave Matthews (notice a softening)?  In the last 10 years I doubt I have seen 3 concerts or bought 4 CDs, but I listen to a lot more jazz and "pop-era" like Bocelli and Sinatra and whatnot.  I occasionally put on K-Rock (New York’s semi-hard-rock station) or load up some DMX or Prodigy, but for the most part I’m Softie McLight.

If anyone wants to chime in on this, answer this question:  what music do you listen to today that you are POSITIVE you will listen to til death do you part – and what music did you listen to years ago that today you can’t believe you liked? 

Comment and make sure you leave a valid email address.  I’ll pick one at random this Sunday and send the lucky winner a mystery CD.  Don’t expect anything good, either.  I have owned Stevie Nicks, Judas Priest and the Stone Roses music over the years, so my entire collection is filled with questionable music.

cash rules

(a possibly apocryphal exchange between British Prime Minister Churchill and an unnamed socialite woman, which demonstrates that anything (or anyone) can be bought for the right amount of cash):

Churchill: Madam, would you sleep with me for five million pounds?
Socialite: My goodness, Mr. Churchill… Well, I suppose… we would have to discuss terms, of course…
Churchill: Would you sleep with me for five pounds?
Socialite: Mr. Churchill, what kind of woman do you think I am?!
Churchill: Madam, we’ve already established that. Now we are haggling about the price.

What if I told you a surefire way to save somewhere from 6% to 10% on every purchase you make that was illegal but hard to get caught at? And before you answer too quickly that you’d never do anything illegal, have you ever exceeded the speed limit while driving? I’m talking about the cash economy.

If you think you live in a place with no cash economy, you don’t get out enough. Here are a few examples:

  • If you hire a nanny, you need to pay social security taxes and so on. Many people choose to pay cash to avoid taxes, illegally.
  • If you buy a big ticket item (jewelry is a common example) you can pay cash and avoid sales taxes – illegally.
  • Offering to pay a cab in cash rather than having him run the meter is an example of a common cash transaction.
  • Waiters and waitresses.. working for cash tips and then failing to report those tips as income.
  • Many people buy services or goods with cash so that neither the purchaser nor seller have to report the transaction for tax purposes – for example, paying a yard cleaning service in cash so they can underreport their income.

This is definitely an illegal practice. It is also definitely happening, every day. In New York City, where I work, it is widespread.  In certain parts of town you hear that almost all transactions have “legit” and cash components. Why does this happen so often, and does it really hurt anyone?

Let’s say Jarvis sells jewelry. He has a $5000 ring that he’d like to sell. The sales tax rate in NYC is 8.375%, resulting in sales tax of $418.75! Now Jarvis knows that his ring is just as nice as Carl’s, but Carl is selling his for $4700 plus tax. Unfortunately for Carl, he’s an honest guy, so the cost of his ring with tax is $5094. Jarvis decides to sell his ring for cash. He risks getting in trouble with the law, but he can easily undercut Bart and also offer a bargain to the customer by selling his ring for $5000, cash. Who doesn’t like saving $419?

The state and Carl, that’s who. Those tax revenues of course go to fund many of the great public services of New York City, as well as many ridiculous wastes of money. Whether or not you view taxes as a good use of money is irrelevant – paying them is the law of the land. Jarvis possibly drives Carl out of business with his practices, therefore depriving the state of even more tax revenue. The state then has to investigate and sue Jarvis, using up even more of the state budget… you get the picture.

Using cash to pay illegal immigrants to be nannies or day labor or whatnot is another example of the cash economy. This is a horrible burden on the US economy. It keeps honest businesses who seek to pay minimum wage uncompetitive and it exploits the immigrants who may not know any better (or have any other choice). The treatment of immigrant labor is worthy of a whole separate post, but suffice it to say that it is not doing anyone any favors, except the greedy company seeking to exploit people by breaking the law.

You will probably hear some politicians make the once-every-four-year battle cry for a consumption tax during the presidential campaign. To me, the idea of a 20% value added tax (or sales tax or whatever you choose to call it) is ridiculous beyond describing. In New York alone, half the economy would go underground overnight. If I was buying a $5000 ring and had to pay $1000 in taxes on it I would definitely be motivated to at least consider my “black market” options. Any politician who proposes this simply doesn’t understand how the cash economy – which exists and is thriving – would explode in the US and create a legitimate “black market.”

So would you be willing to pay cash to avoid taxes? Have you ever? I think everyone has to answer the morality of cash transactions for themselves, but the cash economy is there, it’s strong, and it provides a huge savings to anyone who is willing to assume the risk of entering it.  I think it’s terrible that it exists, but it’s a natural result of higher and higher sales and payroll taxes over the years.

a surprise Christmas present

beautiful snow scene in the countryside

Recently I wrote an article about the Russian Children’s Welfare Society as part of the generous December writing project. I was surprised and delighted to see that “I” won. When I say “I” won, really the RCWS won since they were the recipients of a gift from Kate at Babylune! That was a nice little Christmas present, and I’m very grateful. It’s a worthy charity – not that there aren’t millions of worthy charities, but I really like what they do.

Merry Christmas, everyone!

russian nesting dolls matroshki

(photo credit: scene by Sleestak66; dolls by unknown)

you might be a personal finance redneck if…

With the holidays coming up, I decided rather than posting a serious piece, I’d just post a little lighthearted thing that I wrote a while back. It’s all in good fun – I grew up in a small town in Mississippi so don’t think I’m being prejudiced! This piece obviously owes a huge nod to the original idea by Jeff Foxworthy.

you might be a redneck cat if...

(photo credit: The Duke of URL)

You might be a personal finance redneck if…

…you don’t have to pay alimony because the state you live in never recognized your marriage to your sister in the first place.
…the only stock you care about is a the racing kind.
…somebody asks you if you’d like to invest in a CD and you tell them “no, I’d rather invest in a DVD.”
…when people ask you when you want to retire, you say “right after I get a flat one.”
…you reckon that diversifying is going to be tough to do because you never did any versifying in the first place.
…keeping up with the Joneses means moving your trailer 50 feet to the right.
…you think Warren Buffet is a place where rabbits have an all-you-can-eat bar.
…you pulled your kids out of school after you heard about ‘No Child Left Behind’ because you didn’t want a bunch of one-right-buttock-only children to support.
…you don’t have to worry about the Latte factor, you have to worry about the Kools-and-Schlitz Factor.
…everyone around you had a Poor Dad.
…only use the phrase debt snowball in the middle of a snowball fight: “Watch out fer debt snowball!”
…got all happy when you heard someone talking about an IRA, because you figured it’s time for the NRA to go International.
…you ask a worker at the Wal Mart where you can find the new Formula 401 … you know, the 401K?
…your financial advisor and your bartender are the same person.
…your idea of saving for the future is buying Coke by the case.
…you don’t worry about your retirement because Ed McMahon’s assured you that you might already be a winner.

…and finally…
…you actually know in detail why a subprime mortgage isn’t such a great deal after all.

Hope everyone enjoys their Christmas Eve. I know it will be slow this week but I plan to keep on posting on a regular schedule, so check back often! If you haven’t sent someone a gift yet, I highly recommend sending an gift card!

guest post: how paying attention to your wallet can improve your financial outlook

The following guest post is from a commentator here at brip blap, Sheila.  She doesn’t have her own blog, so I can’t refer you to her site, but she’s got a nice bit of advice here!

Have you ever noticed that often the same topic will come up in casual conversations and on different websites? I have noticed this happening quite a bit lately in my life: coworkers, friends, and a few writers on the web have been touching on the same topics, within the span of a few days. When this sort of synchronicity happens, I take it as a big hint that I should be paying attention to those very things in my own life.

The most recent synchronicity involves an object that each of us carries: a wallet. I was looking my wallet, which was frayed and overstuffed and was ready to be replaced. I mentioned to my fiancé that I would need to go shopping for a new wallet, and I asked him if he needed a new one as well. As it turns out, he is quite pleased with the wallet I gave to him, and it is working well for him.

wallet As I was talking to my fiance about my wallet in particular and about how I was doing with my budget, it occurred to me that I had been feeling frayed and overwhelmed by my finances and all the things I was doing to get my financial house in order. In a strange way, my wallet seemed to be a reflection of what I was experiencing.

To be sure, I have been taking steps in the right direction: 0% balance transfer for my credit card debt, opening a high-interest savings account, increasing contributions to my retirement plan, creating a plan to get out of debt, and reading books and blogs about financial planning. I had accomplished quite a bit within a short period of time, but I was still feeling a bit overwhelmed because I had been doing so much and yet I knew I still had a long way to go. I longed for the day when life would be simpler, when I would have less to do and would be better organized.

Within the next few days, two blog postings appeared in my inbox that spoke to my situation. The first, in a posting at unclutterer called “Trim Your Wallet," addressed the problem of carrying too much stuff in a wallet and the benefits of changing to a slimmer wallet.

After reading that post, I pulled everything out of my wallet and was amazed to see how much stuff was in it that I did not use on a daily basis or even on a weekly basis. I put back into my wallet only those things that were necessary for me to carry (driver’s license, car insurance card, and health insurance card) or that I would use on a daily basis (cash, one credit card, and two small “keyring cards” for discounts at the grocery and the pharmacy). Everything else I set aside.

The next day, a posting appeared at the healthy living lounge by Carole Fogarty, who points out, “Most of us have a strong energetic connection to our wallets whether we realize it or not. It’s either healthy or it’s toxic.”  Entitled “The tao of a happy full wallet," the post explains how to do a bit of feng shui with the wallet: eliminating clutter and simplifying, paying attention to the senses through the use of essential oils and through the choice of a particular color for your wallet, and by avoiding negative thinking when using your wallet.

I thought about the kind of wallet that would be just enough to hold the things I used daily (or at least a couple of times each week), and I ended up buying a slim wallet made of recycled plastic from koyono called a “Jimi.”

I used all the suggestions mentioned in both the blog postings, and I have been pleasantly surprised by the results. My wallet and my mood are lighter, and I no longer have to waste time digging through my wallet to find what I need. My wallet now has only the essentials and it is easy to use. And I find that becoming more organized now, with something as small as a wallet, is helping me to experience the simplicity I have been seeking.

I highly recommend a thorough cleanout of your wallet over the holidays and ask that you consider giving yourself the gift of a new wallet. It will give you a fresh start for the new year and will bring a bit of simplicity to your financial life.

(photo of the Jimi from koyono – link above)

spend less than you earn – the wrong way to think

The wrong way to think: “spend less than you earn.”

If you have been reading about personal finance for any length of time, I’m sure you’ve come across this advice before. It is the wrong way to think, and it will not make you rich.

Don’t get me wrong: it is not bad advice. If you are struggling to get out of debt, or prepare yourself for retirement at age 65 or later, it is fine advice. For most people this may be the best advice that they ever receive. However, it is the wrong way to think. The right way to think is this: earn more than you spend.

“Wait a minute,” you may say, “that’s the same thing.” No it is not. If you earn $1000 per month, and save $100 per month, you’re doing a great job. However, this is thinking that puts a limit on your future. If you continue to earn $1000 per month, you can never save more than $1000. Your pool of money for building wealth will never increase.

However, if your living expenses are $1000 per month and you can think of ways to earn more, there is no limit to your savings or investing or wealth building opportunities. If your living expenses stay at $1000 per month and you can earn $2000, you have $1000 to build wealth. That $1000 can itself generate more cash (dividends, a business, etc.) and soon you may be making $2500 per month. There is no top limit in this scenario, as long as you earn more than you spend.

“I can’t earn any more than I do now,” you say. “My salary review doesn’t come up until May!” You can always earn more money. It’s true; I am willing to bet that everyone has some way they can earn more. A quick list off the top of my head of a few ways:

  • Sell all of your old CDs and DVDs on eBay.
  • Sell all of your old books on
  • Start a blog (with ads).
  • Offer to give people in your neighborhood a ride to work for a monthly fee.
  • Look for money owed to you on
  • Take an online survey.
  • Sell a funny t-shirt on I plan to do this soon. Want a Brip Blap t-shirt?
  • Invest at Lending Club.
  • If you aren’t already putting money in your company 401(k) and your employer has a matching program, sign up today.
  • Get a cash back credit card and use it carefully.
  • Write an e-book. You’ve gotten this far in life doing stuff – there must be something you can offer tips on!
  • Prepare a price book for your local supermarkets and sell it to other people. Or create an email list and ask people to subscribe.
  • If you have a house with extra room in your garage, rent space for people to park their cars while they are on vacation.
  • Write a novel. If this woman can do it while caring for three little kids right after her husband left her, so can you.
  • Start a drop-ship business.
  • Learn to prepare taxes.
  • Make a cute calendar at, then resell it to the public.
  • Set up an amazon a-store. Tell all of your friends and relatives to stop there before buying anything at amazon.
  • Put a PayPal Donation button in your email signature. Ask for $1 for good karma. I have never tried this, but I am willing to bet it will yield more than nothing!
  • Open a high-yield savings account.
  • In Maine, Vermont, Connecticut, Massachusetts, New York, Delaware or Oregon, take your plastic bottles back to the store where you bought them for a $.05 refund.
  • Start doing stock photography and sell your work on iStockPhoto.
  • Print all of your favorite recipes on 3 X 5 index cards, with cute graphics and large, easy-to-read directions, and sell them. People like having something small on hand instead of needing to take up counter space with a book while cooking.
  • Teach at an online school.
  • Become a mystery shopper.
  • The next time you go out of town, look for clever souvenirs from that town. Resell them when you come home, or on the internet. A friend of mine made thousands doing this.
  • Become a resume writer.
  • Can you make arts and crafts? Sell your work online at etsy.
  • Create a line of greeting cards.
  • Marry someone rich 🙂

The simple fact is that if you are looking to retire at age 65, keeping your head down and slogging away at your main source of income while saving a little bit here and there will get you there. That’s not a bad thing! If you are happy with your job, keep your spare time free and do what you like.

However, if you want to get out of the “rat race” – if you want to be free to do what you want when you want – you have to build wealth faster, and the best way to do that is to earn more than you spend.

Russian orphans and a generous December

letters_happychildhood_rcws Over at Babylune there’s a group writing project where bloggers are being asked to highlight their favorite charity. I thought it was a great chance to offer a little support to my favorite charity, and support a very positive writing project.

I came across the Russian Children’s Welfare Society a few years ago through an Internet search trying to identify a charity for the benefit of Russian children. Having lived in Russia for several years in the mid-90s, I’ve always had a soft spot for the country. In addition, I’ve always been very moved by the plight of the most helpless people in any society – the very young, the very ill and the very old. The RCWS has been in existence since 1926. The primary purpose – to help Russian children – has become especially critical after the fall of the Soviet Union. Russia now has nearly 700,000 children in orphanages, a sad total, but nothing compared to the estimated 2.5 million homeless children. The RCWS directs its giving in several ways (from the website):

  • Medical care, the education of the Russian doctors that provide it, and supplies
  • Orphanages and homeless shelters
  • Rehabilitation centers for the disabled or mentally challenged
  • Educational scholarships
  • A Moscow “Yelka” (New Year) party during the holiday season for over 2,000 children. We believe it is the most important celebration of its kind in Russia. Each child receives a gift. For many, it is the only one they will receive for Christmas.

There are also programs specifically benefiting the survivors of the Beslan massacre. The Beslan massacre took place September 1, 2004 at a school in the North Caucasus. A group of terrorists took the school hostage, and on the third day of the standoff a gun battle broke out with Russian security forces. Over 300 civilians were killed, including 186 children. For a town with only 35,000 residents this was a horrific blow, and the need for psychological and emotional support is critical.

Most Westerners have never had to see the horror of children begging and stealing in the streets. It is truly one of the most awful things you can see, and it affects me even more deeply as a parent now. The thought of children meeting Ded Moroz (Santa Claus/St. Nicholas) at the RCWS Yelka (basically the Russian equivalent of a Christmas party) for the first time in their lives and receiving what may be for many of them the first present they’ve ever received in their lives always makes me tear up.

RCWS also helps with scholarships for older orphans, reconstructive surgery (cleft palates, etc.) and many other programs. There’s simply so much to do that I’m sure even if they received millions every year they’d still spend it all without spending a minute worrying about HOW.

RCWS spends more on direct aid to children than it takes in (as of 2005, the latest available public data). You can read more about them at Guidestar (registration required).

I know there are many important and desperate causes in the world, and everyone has to decide what is important in their own mind. Here is the contact information for the RCWS.

Russian Children’s Welfare Society, Inc.
200 Park Avenue South, Suite 1617
New York, NY 10003
Fax: 1-212-473-6301

Note 1: RCWS does not assist in adoptions in any way, shape or form. They are not an adoption agency, so please don’t assume they will help in any way, shape or form with adoptions!
Note 2: I am not in any way affiliated with RCWS other than as a donor.

6 classes every well-rounded person needs

bookWhat are the best subjects to learn for business – and life – success?

If anyone sat down to identify the perfect secondary (and maybe college) education, I doubt they would come up with today’s average American curriculum. While there are plenty of courses in basic skills (reading, writing, mathematics, and so on) many other just as critical basic skills are overlooked (personal finance, homemaking, health/physical education). What are some of the critical components missing from our national curriculum?

From my own personal experience, I can suggest a few, but there are probably many more you can think of easily. I could also bash a few courses I took, but an argument can always be made for “knowledge for knowledge’s sake.” I believe that sincerely. I have never, for example, “used” A Tale of Two Cities in my day-to-day life, but I’m glad I was forced to read it, stuck with it and finished it. Experiences like that created a love of reading for me. Other subjects I guess can be chalked up to “generally good to know although not terribly useful.” For me this included subjects like biology and mythology (one semester of “English” was actually spent studying mythology, which apparently means “Greek mythology” since we didn’t study anything else). While both were interesting, I didn’t learn much from either except that I don’t like biology and that you shouldn’t steal fire from the gods.

Here are a few subjects that would be very useful, and why:

1. Typing. Out of all of the courses I’ve taken in my life, this one has made the most profound difference in my daily life. I took a typing course in high school, back when it meant learning to pound out “the quick brown fox jumps over the lazy dog” 500 times on a MANUAL typewriter. However, the experience taught me how to type, and very, very well, which means I can blaze away typing even while carrying on a conversation or reading something else. Really.
2. Speech. I took a public speaking class that changed my life. Before that class, like everyone, I was nervous about speaking. After it, I was still nervous, but I learned that it was a temporary nervousness and that anything was possible. We had to give speeches to groups, recite monologues, debate, take questions and almost any type of “speaking in front of a crowd” activity you can think of. To this day I am relaxed and confident speaking to any group; I have addressed 2000 people or 10 board directors with equal calm.
3. Personal finance. I didn’t ever take a personal finance course, and I wish I had. Everything I learned about finance before college came from my parents, my grandparents or my own reading. A course that taught me things they weren’t as familiar with or not as proficient with – real estate dealings come to mind – would have been a great learning experience for me. That having been said, I’m sure personal finance would use textbooks sponsored by Capital One and tout the benefit of home equity loans to consolidate credit card debt.
4. Physical education. As a varsity athlete I was exempt from physical education, but I wish I hadn’t been. Learning to do some very basic “normal” training would have been helpful. I focused all of my energy on preparation for one sport (tennis) rather than general fitness. This had disastrous results later in life.
5. Homemaking. Don’t laugh. I think learning how to cook could save this country billions in health care costs. Imagine if people could actually prepare healthy food at home. My mother is a terrific cook, and I never had any motivation throughout high school to learn how to cook. I went straight from there to a fraternity house where meals were provided. When I finally started living on my own, my gourmet best was frozen pizza…
6. Civics. I took a civics course, but it was ridiculous. My wife, who is an immigrant, was required to undergo detailed testing before she obtained US citizenship on the Constitution, US history and civic life. Now, it may not be necessary for everyone in this country to know how many Congressmen there are or how many Supreme Court justices there are (although they should) but everyone should know the Bill of Rights and their civic duties (jury duty and so on).

You could go on, but these are some basic courses that would make a big difference in the US population. They are not taught often enough, and it’s a shame they aren’t. I am amazed to this day when I see people hunt-and-peck on the keyboard – not because I blame them, but because that’s not a basic required course for graduation from high school today. The same goes for the other 5 subjects up there. It’s hard to say when they will be required – or if they ever will be – but we can hope.

how to start investing

If you have never invested anything before – nothing – what should be your very first investment?

I am not a financial advisor, so take this with a grain of salt – you should consult with someone who knows your unique situation and can provide advice specifically for you. That having been said, here’s a fast and furious guide to investing.

  • If you have an emergency fund of at least one month’s salary (and that’s just an approximate amount, choose an amount that feels right to you) and put it in a high-yield savings account (ING, HSBC, etc.)
  • Once you have an emergency fund, check to see if your company has a matching program for any retirement programs (401k, 403bs, etc.). If so, contribute at least that much to your company’s program. If you are in a low tax bracket now and expect to be in a higher one in the future, put money in a Roth IRA. Unlike your 401(k), you can get the principal out before age 59 1/2, which is nice if you plan on retiring young.
  • If you max out your retirement accounts, start building up your emergency fund until you have at least several months’ salary saved up. Personally, I have approximately 6 months – it’s a nice feeling to know that you’re set for that long if you have an emergency.
  • Finally, if you’ve saved the maximum in your tax-advantaged accounts, open up a brokerage account with Scottrade or TD Ameritrade or Zecco or Sharebuilder – don’t agonize much over which one, because you’re not going to be doing day trading. Right? Buy index funds or ETFs and then forget about them for the next 20 years (at least). Once you have a balance of $100,000 in various index funds and ETFs, you can think about individual stocks. Before that point, don’t bother. Why $100,000? At most brokerages, that’s the level where you start getting preferential treatment for fees, research, etc. To be honest, if you’ve managed to get to this point, you don’t need any more advice, do you?

There you go! Nothing to it. To summarize:

  1. Fund an emergency account to a minimal level.
  2. Contribute fully to your retirement plans.
  3. Build up your emergency account until you have several months’ salary saved.
  4. Buy index funds until you have $100,000 or more in savings, then consider other investment routes.

That’s it. Don’t make it complicated. There are a lot of other steps to investing, but when you get right down to it you can keep it very simple until you have a lot more money than you did in the beginning. Too many people try and overanalyze the process, but when you get right down to it, the tough part is coming up with the money to save, not HOW to save it.


is college worth it? (part 2)

princeton college in second life

Note: Fecundity took a look at the spreadsheet I used to calculate these numbers and found one formula error and a couple of simplifying assumptions that she refined (she built a more realistic tax calculation, for example). None of the changes affected the conclusion, and in fact it tilted things a bit further in Paul’s favor, so I decided to edit the original article to reflect her changes. Thanks Fecundity!

As I discussed earlier, I’ve been wondering about the difference in wealth between college graduates and skilled non-college graduates. I decided to do a comparison of the two career paths, and see what those big choices meant for someone later down the road. Specifically I wondered if I could answer a few questions:

  1. Can the late start in saving by the college graduate be overcome through higher salaries?
  2. Does the lower earning potential of a non-college graduate mean that the non-college graduate will be required to “work until they die”?
  3. Who will be able to quit the rat race first?

Fred attended college for four years, taking out student loans. Paul got a job at 18, straight out of high school. I wanted to see whether college was worth it, and whether attending college helped or hurt Fred’s chances of getting out of the “rat race,” and whether Paul was facing an unbelievable uphill climb to achieve the same goal.

I made a lot of assumptions. Both men work until age 65. Tax brackets as of 2006 are used (15% to 33%). Both invest in accounts returning 8% per year. Fred starts college at age 18, taking out $40K in loans ($10,000 per year). When he finishes college, he pays back 5% per year ($2000) . He puts aside 10% of his after-tax income for debt and investing. He pays the debt first. He invests the balance of the money. His salary starts at $27,000 and increases 4.5% per year over his life (average annual wage is $80,947).

Paul starts working at age 18. He invests 10% of his after tax income, and has no debt. His starting salary is $8.95 an hour and over his lifetime his average annual wage is $44,895 based on yearly increases of 3.5%.

Here’s what happens. Fred contributes less than 3% of his after-tax income to his investments until he’s 32 years old. He doesn’t invest more than Paul does until they are both 42 years old! His tax bracket jumps to 25% when he’s 26, and by the time he’s 25 he only has $2,000 saved, or approximately 6% of his annual pre-tax salary.

Paul, on the other hand, starts earning and investing when he’s 18. He doesn’t reach the 25% tax bracket until he’s 35 years old. However, at age 35 he has almost $75,000 saved, 231% of his annual earnings before tax.

Fred starts to catch up once his loans are paid off. His investing, starting when they are both 42, is now approaching 1.6 times more per year than Paul. However, by age 50 Paul has $328,000 saved; Fred still only has $164,000. However, since Paul had 4 times as much saved as Fred at age 35, this ratio of almost 2 to 1 is a huge improvement.

As we approach retirement age, Fred is living a pretty good life. His salary is in the mid-six figures at age 60 ($143,000). Paul is making half as much ($76,000). Fred is moving into the top tax bracket, and socking away more than $10,000 per year in savings. Paul is still saving about $500 per month and is just preparing to move into the 28% bracket.

At 65, Fred is making $180,000 per year. He has over $777,000 in savings (4.3 times his salary). His savings in retirement will generate $31,000 per year at 4%, the rule of thumb used for retirement withdrawals for a sustainable amount assuming a normal US life expectancy (78). This means that he will have to live off 24% of his last after-tax salary, plus whatever government benefits or pensions or capital gains from selling his house that he can obtain.

Paul, on the other hand, has more than a million saved ($1,189,000). He NEVER saved more than $600 per month in his whole life. His final salary was $90,000. He will have $47,600 per year (using the 4% rule) to live on; still only 67% of his after-tax salary, but much closer than Fred to a reasonable amount.

Amazingly, Paul only invested a total of $177,000 over his 48-year working life. Fred invested more: $231,000. Yet Paul’s final portfolio contained 7 times more cash than he invested; Fred’s was only 3.36 times as much as he invested.

Paul ends up with $412,000 more than Fred. Paul, at age 65, has a far better chance of surviving in comfort off his $1 million portfolio and a lifestyle presumably suitable for someone who makes less than $100,000 per year. Fred, on the other hand, will struggle to survive if he maintains a lifestyle built around a $180,000 per year salary with only $777,000 in the bank.

Now Fred, of course, may have bought a house in a metropolitan area when he was 40 and now can sell it for hundreds of thousands in profit; however, I’m willing to bet that unless he was highly disciplined he still has a mortgage, and the chances of making over $400,000 in profits on a home are small (not impossible – but small). Fred may also have had access to tax-advantaged plans and matching programs through company 401(k)s and so forth that Paul might not have had. Even if all of these scenarios play out perfectly for Fred, he barely catches Paul. Even if he DID have $1.3 million saved, it’s still only enough to guarantee 29% of his after-tax retirement income.

So what does this all mean? Should every 18-year old skip college and go straight into the workforce? The short answer: no. Assuming that you did start earning at 18, you would need to be a highly disciplined saver, and not everyone is. If Paul didn’t start saving until he was, say, 29, he has only $665,000 in savings at age 65. Those extra 10 years after high school – when he saved only $18,000 – made an almost half million dollar difference at the end of his working life. Ask yourself how many people at age 18 can save 10% of their salary. They exist, sure, but realistically very few people have that discipline.

What’s the solution, then? I think if you go to college, avoid student loan debt if you can. How? Don’t go to an expensive school if a less-expensive option is available. If Fred’s student loan for $40,000 disappears, he has $1.3 million when he retires. Still not enough, probably, but $650,000 more than he would have had. That debt makes a huge difference.

A second tip is start investing early. Very small amounts invested early in your life will grow significantly more than the same amount (or an even greater amount) invested later. If you managed to save a few hundred dollars in high school, that’s far more significant than thousands when you’re in your 40s. Think about that – a tiny bit of sacrifice early on will make you richer than a much larger sacrifice later in life, when you think you have “too many expenses.”

A third lesson: consumer debt will cripple your chances of accumulating substantial savings. I assumed both men were exceptionally disciplined and never incurred any debt other than student loans (in Fred’s case). If either one had spent that 10% per year on credit card debt instead of investing it, their future prospects for quitting work before death plummet to almost zero.

A final lesson: even small amounts make a huge difference. Think again about this statement: “He [Paul] NEVER saved more than $600 per month in his whole life.” Isn’t that amazing? Not one month in his life did he ever save more than the cost of an iPhone plus accessories, or much more than digital cable plus cell phone service. He didn’t save thousands per month, just $600. If that’s not enough, keep in mind that was the absolute maximum he ever saved in a month! On average, he only saved around $300 per month over his life!

Here were my original questions, and the answers I discovered:

  1. Can the late start in saving by the college graduate be overcome through higher salaries? Not really, unless the college graduate’s salary is significantly higher or the savings rate is substantially greater.
  2. Does the lower earning potential of a non-college graduate mean that the non-college graduate will be required to “work until they die”? Absolutely not – in fact, if the non-college graduate is a disciplined saver, the opposite is true.
  3. Who will be able to quit the rat race first? Based on my model, the non-college graduate – but the real indicator is who starts saving the highest percentage of their income earliest in their career.

Don’t take too much of this as gospel. This was an illustration only, and of course a million variables come into play about spending habits, debt, housing, career growth, investing choices and so on. The purpose of this exercise was to challenge my context, and hopefully yours too. Don’t always assume that just because the college presidents of America tell you that you need college that you do. I had a lot of good times in college, and I wouldn’t trade them for anything. But don’t kid yourself – colleges are businesses that want your tuition to fund their foundations and football teams and new buildings and conferences and so on. They want you to take out big loans, because they don’t care that you start your earning life saddled with debt as long as they get their tuition revenue.

The moral of the story is that you shouldn’t believe a thing just because everyone else says it’s true.

(photo by MarkWallace)

how to breathe


What if I told there is something you could do to feel better in 5 minutes?  No matter what condition you are in now – fit, overweight, tired, at work, exercising – you will feel better almost instantly?  On top of that, what if it helped you sleep at night?  Best of all, you don’t need any special equipment or a gym or anything at all to do it.  I’m talking, of course, about breathing for relaxation.

First of all, if you begin to feel faint you should immediately stop what you are doing and breathe normally.  As you do this more frequently, the feeling should decrease.  And of course if you have any sort of condition (heart problems, asthma, respiratory illness, blood pressure issues, or anything related) you should consult a physician before continuing.

Here are the 5 steps to breathing for relaxation:


  • Make sure you are seated comfortably
  • Blow your nose if you need to
  • Relax your face; imagine the system of muscles running below the skin and relax them, one by one
  • Keep your spine straight, feet on the floor
  • Keep your stomach from being "bent in"
  • Put one hand on your stomach, one in your lap


  • Inhale through your nose
  • Breathe in on a count of four
  • Relax your throat
  • Mentally picture air rushing through your lungs, filling them up
  • Feel the inhalation lift your chest and rib cage
  • Visualize the diaphragm pushing up
  • At the end of a count of four, hold your breath momentarily before beginning to exhale


  • Exhale through your mouth
  • Keep your mouth in "U" position – the shape it would be in to say "OOO"
  • Exhaling, feel your belly shrink and your lungs deflate
  • As you exhale, relax your shoulders; if you find this hard to do, lift the corners of your mouth as if you were slightly smiling, but still keep your lips pursed to say U (it sounds tough but it’s not that bad).
  • Breathe out on a count of five


Stop after 3-5 minutes.  You are not trying to meditate or go in a trance or fall asleep!

Ideally you do this in a calm environment, but I do it sitting at a desk at work, on the subway, etc.  It doesn’t have to be obvious.  The critical component is to really focus on the breathing, and do it in a calm and methodical way.  The rhythm is important – when you breathe normally, you probably change the pace and depth of your breathing from minute to minute.  Keep it steady.  Feel your chest moving in and out. 

The whole technique may sound funny but it can work wonders.  If you are trying to control stress, this is a great first step.  There are significantly more sophisticated techniques (yoga has a whole series of exercises called ‘pranayama’) but this is a good quick starter.  Give it a shot.  You’ll feel better rested if you do.

(photo by mikelens)