Monthly Archives: April 2009

COBRA premium reduction

2008.11.25 - The physician

I’m going to divert from my usual ramblings and talk about the staggering (to me, at least) implications of the COBRA premium reduction.
First of all, what is COBRA?  From Wikipedia:  “The Consolidated Omnibus Budget Reconciliation Act of 1985… is a law passed by the U.S. Congress and signed by President Reagan that, among other things, mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving employment.”  Basically it means that if your employer gives you access to health insurance coverage and you use it, then you are eligible to continue in that plan after you quit or get laid off.  Usually the employer’s been picking up a chunk of the premium that the employee has to start paying, but it’s still a fairly nice deal for most people as a bridge.

At least it was until the Great Recession hit. Like many other people, I didn’t anticipate being out of work for almost five months now.  I knew from day one I’d need COBRA, because until recently you had a 30 day window to opt in or out.  If you opted out, you were out – you couldn’t come back to COBRA after you left.  Finding independent health insurance is difficult even if you’re healthy; if you are sick, or (like me) you have a family with two small children (i.e. needing lots of medical attention in the form of shots, etc.) it becomes a real struggle to find affordable insurance.

So out of the stimulus act comes the COBRA premium reduction. You are an assistance eligible individual if you are qualified for COBRA and:

  1. Your COBRA period began between September 1, 2008 and December 31, 2009.
  2. You became eligible for COBRA as a result of a covered employee’s involuntary termination of employment in that time period and
  3. You elect COBRA coverage.

Cutting through the legalese, what does that mean? It means that if you qualify for COBRA, the government’s going to pick up 65% of your bill.  65% is a typical employer’s share of the premium payment for current employees, so it likely means that if you’re laid off your medical bills won’t go up much.

Forget politics, and forget whether this is prudent in the long term for America. That’s another post.  What this provides is a huge opportunity, and one worth considering seriously.  I’ve suddenly been told that I can keep my health insurance, which covers the great majority of my medical expenses, for a reasonable amount (about $400 per month) instead of an unreasonable amount ($1400).  The unintended social effect of this may be profound:  people like me who might have been otherwise inclined to scurry as fast as we could back to corporate employment for the sake of health care benefits may instead opt into independent contractor status in the short term.

I have to admit that I was anxious to get a “job” with benefits as quickly as I could once I realized my independent contractor lifestyle included an almost $1500 per month bill for health care (for a family of four). It’s not like that $1500 per month includes 100% of my costs, either – $25 copays, pharmacy copays and 10% (or more) shares of medical treatment add up.  Children’s immunization shots are pricey.  Even minor medical treatment can add hundreds to that premium payment of $1500 per month, but I’m grateful – without insurance the treatments would soar into five figures for even routine medical care.

If health reform becomes a reality, imagine what it would mean if everyone was entitled to $400 per month (or less) health care. Fear of striking out on your own as an entrepreneur would drop drastically.  People wouldn’t need to drop health insurance coverage to pay the rent.  Families would go to the doctor for routine preventative care in order to avoid later, more serious health problems.

I’m not suggesting that this COBRA premium reduction is a cure-all, because it isn’t. I know quite well that the whole doctor-insurance-company-patient triangle is rotten to the core.  Charges are flung about at random in hopes that some will stick and someone will pay them:  the insurance company, the government, the individual.  But it’s refreshing to see a change in the health care paradigm in this country.  As someone who has a (knock on wood) healthy family of four I had started to consider quite seriously dropping health insurance in favor of a catastrophic plan, and I’m glad – for once – that the government is doing something which will hopefully have a long term positive effect.  If people are confident that getting laid off won’t mean they can’t afford health insurance, they may be able to go out on their own or hold out for a decent job before settling for a position just for the sake of benefits.

photo credit: a.drian

all that is valuable

Will code for food

All that is valuable in human society depends upon the opportunity for development accorded the individual.

– Albert Einstein

I love pop culture, as long as it is my pop culture. I love Star Trek and don’t care much for American Idol.  Loving one and not caring for the other won’t make me much better or worse as a person; there is nothing in Star Trek that makes the fans of that show “better” than the fans of American Idol.  Yet I feel that there is some value from the one show not possible from the other.  I feel that liking one over the other makes me more of an individual.

There are many opportunities for the individual to disappear. In a totalitarian society, the disappearance of individual is a survival instinct.  In a command economy, it’s the easiest action.  In a capitalist society, it’s not the way to wealth but it may serve as the avoidance of poverty.

If you stop and think about the ways in which you can live a “life fully lived”, either through commerce or service or self-improvement, the individual is key. I imagine Donald Trump gets the same sense of satisfaction through commerce as a community organizer does through service to others, although I can’t be sure.  But the opportunity for development accorded to the individual makes or breaks a society.

Do you want your neighbors to succeed? Your city?  Your state?  Your country?  Your world?  At each point you’re concentrating less on your own self-development and more on a larger ideal.  As a family man, I concentrate less on my own self-development (reading, contemplation, exercise, etc.) and more on my family’s development.  I think others expand this to concentrate more upon their neighbors’ development, and so on.  It’s not a bad thing, but I think every time you set aside your own self development for society’s, you eventually will suffer.

Boil it down to real life? Killing yourself to guarantee your children’s college education?  Paying exorbitant taxes to support a dying city?  Working to support a corporation?  Destroying your own health to support a family?  All are self-defeating in the long view.  Each will eventually undermine the initial reasoning; working long hours and wrecking your health to support your family will fail to pay off when you die young, for example.

Most people can’t make that difficult choice to concentrate on their own self-development. I’ll be honest:  I can’t. It’s hard to say that you need to work on your own happiness or health or prosperity now to ensure your family (or friends’, or community’s, or whatever) betterment tomorrow.  Sacrifice is tough in the short term.  America hasn’t demonstrated much stomach for that in the last decade or two, and we’ll pay the price in the next couple of decades.  But if you want to help others often the best way is to learn to help yourself first.

photo credit: pvera

linklings, three things for Friday edition

Bonsai Moon

I have had some real trouble staying organized lately.
I’d attribute some of that to the move, but I’d also continue to attribute some of it to lacking structure to my days.  When you don’t have a 9-to-5 schedule it’s easy to think that you’ll get around to something “a bit later” – when in fact the day becomes filled up with a million mundane 30-second tasks.  Take out the garbage, for example.

I’m going to try a new “to-do” list methodology, based in part on Zen To Done‘s “Most Important Things” concept:  I’m going to pick out 3 things from my “to do” list each evening. Two will be things I need to get done in the short term, and 1 will be something related to long term goals.  So for Friday I have “order more boxes from; clear email inbox; and get information for a Florida teaching certificate.”  I won’t even think about doing anything else on my to-do list unless all 3 of these are done.  Wish me luck.  If I get organized enough I’ll put this all into GTDAgenda, which is a cool service I need to write about at some point soon.

I had a conference call with ING and a few other bloggers yesterday, and hopefully I’ll have a bit more information about that in the near future, as well as an interesting book I read and some other products (like GTDAgenda and a few others).

Links from the Money Writers and others:

One of the best articles I’ve read in a while:  Ramit Sethi (of has a guest post on Free Money Finance titled “Trying to Earn More Money? Stop Wasting Your Time“.  I need to print this and nail it somewhere I’ll see it all the time – like on my PC monitor.

A Wall Street Journal Subscription is Cheaper Than You Think – Get a Discount on the WSJ: Me, personally, I don’t subscribe to anything that I have to pay for anymore. I like the WSJ’s business news, but I dislike their politics.

Index Mutual Funds Are Still Not Popular, But: I’m surprised at this stat, but I shouldn’t be, I guess.

My Million Dollar Journey – Some Lessons Learned: Good points; if you set an ambitious goal and don’t meet it (or think you will) it’s important to learn from that experience.

Save Money on Moving: A few good tips, and so far I can attest that hiring a mover is a difficult (and nerve-wracking) experience.

And a few more links:

And yikes on this article: I hate David Dellifield. The one from Ada, Ohio. But I do have to say I agree with a lot of what she’s saying, although not the tone she’s saying it in.

photo credit: h.koppdelaney

enjoy earth day, then forget about it

Hippie VW 1

The purpose of events like Earth Day is to focus attention on a particular cause – in this case the environment.
It spawns a lot of stupidity and meaningless lip service.  Why send Earth Day cards?  Or go to amazon and find great items like a 22 inch Earth balloon – nothing says Earth Day like plastic balloons.   Gestures will be made and hot air emitted by earnest speakers.

I am tired of much of the ‘new green movement.’ Ads for environmentally friendly plastic bottles (environmental benefit?  “Easier to carry!”) and ‘green writers’ who live in castles annoy me almost as much as cars that get 40 miles per gallon being touted as environmentally friendly, since they destroy the world half as quickly as 20 mpg cars.

Frugality, wealth-building and environmentalism all have a common cause:  consume less. I buy 2-liter bottles of seltzericon incessantly – but recycling them could never be as efficient as quitting my seltzericon habit, or getting a soda siphon.  A lot of steam will be expended on carbon-offset credits and recycling and new technologies, but the simplest way to be green is to consume less.  Eat less meat, in particular (read this link from Fox News, of all places).

I don’t think the current excitement about the environment, and consciousness about all-natural/organic/green goods is real. In the current advertising and interest I see shades of the mania about low-carb eating from the late 90s, when items like low-carb pasta were advertised without irony.  I count myself among the gasbags, by the way.  I claim to care about the environment, but in the past 6 years I’ve acquired two cars, a bigger house, bought countless plastic toys and generated two full bags of garbage a day, full of disposable diapers and non-composted organic waste.  I may do more when I finally move to a single-family home in Florida in June.  I plan to do more – continue growing vegetables and herbs, reduce waste by reducing consumption and trying to make small changes (siphons instead of 2-liter plastic bottles of seltzericon).

So happy Earth Day. I see a holiday that’s headed toward pointless commercialization – pop music, frisbee and gift cards for loved ones.  It’s a shame, because attention to the core issues of environmentalism benefit us all (except plastic producers), whether you believe in climate change or not.  I just hope it won’t go the way of Thanksgiving and so many other holidays and lose its meaning.

photo credit: Marshall Astor – Food Pornographer

why I spend


I forget, from time to time, why I care so much about money. I know that the easy answers are “I do it for my children” or “I do it for financial freedom” or even – if we’re honest with ourselves – “I do it for stuff.”  In the western world, in America in particular, it’s hard to forget money for a minute.

But money can’t be the reason for life. Money’s just a symbol for other things.  It’s the placeholder for a vacation, or a college education, or payments on a medical bill.  Trying to pretend it represents status or security or happiness is a false choice.  It means nothing other than a temporary victory against time.

If you had all the time in the world to work, you’d have all the time in the world to earn what you needed to get what you want. You use money to bridge the gap between your lack of time and your desires. I’d like to have enough time to earn enough money to obtain everything I want in terms of material goods – without working too hard in the meantime to acquire it.

Every iPod, every plasma TV, every air conditioned car and every creature comfort represents a few seconds or minutes or hours (or more) of your life that you traded for things. Some things are necessary – I like having a refrigerator, for example.  But I regret my mortar and pestle.  A few minutes of my life were spent earning the money I exchanged for something useless.

I‘m sure you’ve read plenty of screeds against materialism on the web. Books like Your Money or Your Life hammer this point home.  But why do we do it?  We do it because, no matter what anyone says, spending our measure of days on Earth is not as pleasurable without things or experiences.  Without that dinner on the bay in Barcelona, or the air conditioned car, or the gleaming black tux at New Year’s life would be a little less.  We can do without a lot, but not without everything.

Nobody needs an Xbox, or jewelry, or new books… but these things make the days a little better and a little brighter.  We can all determine what price these things are worth, but I’m tired of the idea that any glimmer of consumption in the pursuit of happiness is a flaw in one’s character. All of us can look around and see someone who lived a shorter life than they hoped for, and wonder why they saved or delayed living a little fuller life.  Nobody should be wasteful or spendthrift, but trade your time for money wisely.  Financial freedom is a worthy goal, but a life fully lived – which may mean some money spent – is also an end to be admired.

photo credit: macieklew

The Real Meaning of Risk

By Curmudgeon – Curmudgeon’s a long-time friend of brip blap and I always appreciate his contributions; here’s his latest:


I’m afraid that I mentally hit the ceiling earlier when I read a comment on one of Steve’s posts.
The comment was:

In real estate, the quicker you can go into massive debt, the quicker you can become massively wealthy. (Link)

It’s true, but in a very misleading way. The operative word here is “can.”  It is easy to miss, and many people will automatically interpret this as “will” or even worse, “probably will.”  That is precisely incorrect.

If you go massively into debt, what you do is you take on a massive amount of risk.  Risk isn’t necessarily a bad thing; we take risks many times every day – getting on the highway, crossing the street, eating that Big Mac (well, a bunch of Big Macs, over time).

But in general, the odds of us succeeding in getting on the highway without an accident are pretty good. Most of the day-to-day decisions we make regarding risk turn out just fine, because our chances of being successful are pretty good.

Going massively into debt, with the expectation of making a massive amount of money? Well, the odds there are not so good.  It’s not strictly a crapshoot, because it depends on your timing.  If you get in early, it has a better chance of paying off.  If you get in later, your chances decrease significantly.  Guess what?  The timing part is the crapshoot.  There is no timing the bubble.

If you take on more risk, you have a chance of making more money. But that chance is smaller.  In fact, sometimes it’s downright nonexistent.  How can you tell when it’s tiny or nonexistent?  Well, you can’t.  You have to assess it with incomplete information and no clear vision of the future, and that’s not the easiest thing in the world.  But if you are taking a lot of risk, you need to understand that a big return, or even any return, is by no means a sure thing.

That doesn’t mean that you shouldn’t consider leverage in your investments. Risk isn’t a bad thing.  But you have to understand your tolerance for risk, and to understand how much risk you are taking.  These are inexact concepts, and people assess them imperfectly.  We make mistakes.  If you bet the house, you may lose thehouse.

So yes, you can do real estate, or even any variety of other investments, and go massively into debt.  But you might prefer to buy a lottery ticket instead.  You’ll lose less, but you may be able to sleep at night.

photo credit: jonrawlinson

linklings, too old for the factory edition

Doctor Fate is so awesome

Another week goes by and another spate of bad job news.
I’m beginning to suspect that I may be in the “old enough to be difficult to hire” category – many of the manager positions I’ve looked at quickly turn me down.  I doubt it can be my qualifications or me personally – since many of my applications don’t even make it to the phone interview stage – but perhaps they think “senior manager guy’s gonna want big money.”  Or maybe my last five years consulting on Wall Street don’t look as nifty as they did a year ago – hah.  I’m casting about for direction, and still hoping that one of the consulting contracts I’ve got very strong leads on will work out, so I can avoid reentering job world.  I don’t feel that I want to do it, and of course that mindset doesn’t help, either.

When you are moving, life drifts into a bit of stasis. A lot of ideas about starting this or doing that get paused and filed away with “I’ll get that done after we move.”  I’ve been meaning to start an LLC – but now I think I’ll wait until I’m closer to moving to Florida.  I’m going to pursue some sort of certificate education (teaching?  financial planning?) at one of the local colleges… down there.  I’m going to start a small business, hopefully, doing some kid’s party entertainment – but now I’m just researching and won’t get started.

Of course this is just procrastination. I could start all of these things today if I felt pressure to do so.  But with so many things to organize for the move these ideas seem destined for the shelf for the time being.  I doubt it’s a characteristic of a successful person, but then again maybe I’m just being organized and prudent.  Time will tell.

Some links for weekend reading:

My Tenant: “I’ve Lost My Job and I Can’t Pay You…”:   Words that would give any landlord a sinking feeling.

Can One Choose Not To Participate In A Recession?:  This is an interesting idea from the always-interesting (if not, in my opinion, always correct) Dave Ramsey.

Your Home Office: Ideas To Set Up Your Place of Work: Oh, to have a home office.  I know, I am wishing for more space and a bigger home, and I know that’s verboten in the personal finance blogosphere.  I sincerely hope that sometime in the future I’ll have a place with a room that can be devoted solely to work (and by work I mean blogging, writing and consulting).  With a door.  The door is key.  Having a computer in a corner of the open-floor-plan living area is in no way conducive to getting work done during the day or putting yourself in a work mindset.  My office, however, would not need to look like Gore’s.  Yikes.

How Long Does It Take Your Broker to Answer Your Call?:  I only have experience with three brokerage firms in the last 5-6 years.  TD Ameritrade (where I keep my retirement and brokerage accounts) is terrific.  They answer the phone almost immediately, and I have yet to have any trouble with my account (I say that while furiously knocking on wood).

Did You Miss the Stock Market Rally?:   I don’t think March was a real rally, to be honest.  I think we’ll see another dip, and I need to see one more strong runup before I’ll believe the market troubles are over.  And I have to vent on a pet peeve:  the market and the economy are NOT the same thing.  The economy’s going to be in the dumper for a while.  The market may come back long before the economy does – and by the economy I mean jobs, productivity, real estate and so on.

The 80/20 Rule and How it Applies to You:  The Pareto Principle is a great way of looking at almost everything in life – if you don’t know what it is (but if you read this blog, I am sure you do), check it out.

Taking Control of Your Life By Finding Balance:  I probably worry far more about balance than I should.

Poll: Generation X Feels Unprepared for Long-Term Care Costs. Are You Prepared?:  I’m not.  I’m one of those people who’s buried his head in the sand a bit on long-term care.

How to Save on Digital Services:  We drop a LOT on digital services, although much less than we did.  Probably the biggest waste?  A landline, which we need because of (a) a security system and (b) we use DSL, so it’s cheaper when bundled.  I’d love to have nothing but high speed internet and a Roku Digital Video Player.

How To Become An Expert:  It’s true that 10,000 hours of practice will make you an expert, I suppose, although I’d argue that you may not need to be an expert to be successful – these are two different things.  Practice does work, though.  I’ve been learning to juggle and after spending one hour mastering the basics, I’ve been doing it every day when I have a few free minutes.  10,000 hours will be a long time in the future, but the 5-10 hours I’ve put into practice have already made me a decent three-ball juggler.

And so it begins …:  Jacob is doing what a lot of us aspire to and “retiring” early.  Extremely early, hence the name of his blog.  Jacob’s blog is thoughtful and doesn’t focus solely on any one aspect of his life.  Although he takes a different approach than I would in many areas, I’ve found his blog thought-provoking, which is the best reason to read any blog.

Why Achieving an MBA is No Longer My Goal:  What? Don’t let too many people hear this – someone else decided that going into debt for a degree he didn’t really want or need wasn’t worth it because his real-life experience in building a company was – gasp – more interesting and more profitable.   My master’s degree in accounting is nothing more than a resume padder at this point – think that corporate income tax course I took in 1994 is worth anything now?  The code’s changed so many times since then it’s ridiculous.  I didn’t mind getting my master’s since I got a free ride (graduate scholarship and a teaching assistant stipend), but would I go $40,000+ into debt to get one now?  No way.  MBA’s aren’t worth what they were 20 years ago.

I Am Just A Blogger, Damn It!:  Amen.

4 FREE Videos for INO TV!: If you have any interest in trading actively – which I wouldn’t for retirement savings or the bulk of my investment accounts, but do engage in with smaller amounts – here are some free technical videos.

photo credit: TheeErin (great photo! — Steve)

how to pay less income tax

Mr. Liberty

Taxes.  It’s that day – the day the bloodthirsty government takes its pound of flesh out of you to pay for the programs and causes we (as a people) have voted for, again and again.
Medicare, Social Security, the wars in Iraq and Afghanistan (and before that, the Cold War), and public roads, schools, libraries, safety and health are all part of that check you cut.  It’s a tough burden to bear – and Americans pay less in taxes than any country save Iceland and Ireland – but we are tough enough to bear it.

I’ve found the awful but foolproof way to pay less income tax this year. Earn less.  It’s not the answer anyone wants to hear, but it’s true on several levels:

  1. Earn less income and you’ll pay less tax.  Everyone knows this.  Lose your job, and if nothing else your taxes go down.
  2. Earn less income and make more money through capital gains, dividends, interest income and other “asset-generated” means and you’ll pay less tax.  This method is what makes millionaires.
  3. Earn less income and you’ll qualify for all sorts of benefits that you won’t get as a  middle class American.  Medical benefits, tax credits, unemployment, government housing and thousands of other benefits will suddenly become available to you as you earn less.

Living in New York, I always realized that there was a weird economic situation going on:  you can live easily in Manhattan (or New York in general) if you are very rich OR very poor. I’m not equating the two – being rich is much easier, of course.  But if you can qualify for government-subsidized housing you can live across the street from multi-million dollar homes in Manhattan.  If you are middle class, you’ll get squeezed.

If I can step outside my own life and look at it from a distant perspective, I’ll be interested to see how my 2009 tax bill shapes up. I’ve ratcheted up insane medical bills (through COBRA premiums) against minimal income.  If I owed 2009 income taxes today, I’d be impoverished.  My net worth is still fairly high – I’m living off liquidating some assets right now – but as far as income goes, I’m staggering along far below the New York/New Jersey poverty line.  I should show up as impoverished, and I’ll be interested to see what that does to my tax bill.

So as this recession deepens, I’ll tell you how to pay less income tax:  earn less income and buy more income-generating assets. The US tax code favors people who earn less from income and earn more from income-generating assets – it’s that simple.  Looking at a business owner or a corporate lawyer generating the same income but from different sources, the business owner will win.  When the tax deadline comes on Wednesday, you want to be earning less.

photo credit: TheeErin

TurboTax Deluxe Federal + State + eFile 2008 [DOWNLOAD]: I highly recommend TurboTax – it’s easy, quick and keeps your information ready for next year’s taxes.

how to have no debt

walk away

First of all, rent, because a mortgage is a big debt.
I don’t know if most people qualify renting a home as debt, but I’m going to say that renting is not debt. I can walk away from a rental home with no future obligation (except canceling the lease) and other than the obvious problem of needing a place to live it’s not necessary that I pay THAT rent next month. I have to admit that as we prepare for our move – having sold our house and having rented a house in Florida – I feel a tremendous sense of relief now that we have no debt.

Saying that I have no debt would not have been possible without these four other basic financial planning steps:

  1. Despite what Bubelah might say – because she detests the frugality mindset as the cheap mindset – we are frugal people.
  2. We do not incur debt for anything, worthwhile or not.
  3. We spend money when necessary.
  4. We watch our money.


We don’t clip coupons. We don’t darn socks. We do air dry clothes, and we do buy store brand goods (i.e. store brand sugar versus name brand). We’ve never thought of ourselves as penny-pinching people, but we do reuse ziplocs and we do make careful use of bits and pieces around the house. It’s never been a conscious effort to squeeze every last penny out of our lives. We simply looked for good spending habits and stuck to them. We shopped at Marshall’s instead of Saks, and bought generic items instead of name brand.


A simple rule, which I know is hard for so many people: do not go into debt. Incur debt for nothing. Nothing. Nothing. I’d repeat it again but you’d quit reading. Not for a car, not for a college education (if you can afford a less expensive one, that is), not for home improvements – never. Don’t ever think that THIS time you can get away with a few dollars of debt. Other than a mortgage (and that’s debatable) if you avoid debt you’ll always be better off. There are a few times when it’s more understandable (for medical expenses, or for an education), but by and large you’ll seldom be sorry if you steer clear of debt.


If you need to spend money, spend. When we first married, cleaning our townhouse took forever. We were both working, and cleaning the house took what little free time we had on the weekends away from us. We paid to have someone clean the house, and it was worth it. It freed up time for us to do more productive activities, ranging from having more time to cook to having more time to interact with other people. We’ve also spent money here and there on other services and goods to free up time. You can generate more money; you can’t generate more time.


We watch our money. Early on in our marriage we turned money management over to Bubelah, who had never had budgeting responsibility for a household before. I had (although only as a bachelor), but we thought it was important for both of us to have a full picture of the inflow and outflow of cash. Since we’ve been married, both of us have had a good understanding of where our money is (brokerages, retirement accounts, checking, savings, etc.) and a good understanding of where it’s going (bills). I don’t think anyone can be on the road to riches if they don’t understand where the money’s coming from, and where it’s going to.


How to have no debt? First of all, incur none. It’s easier said than done, I know, and many people don’t hear that advice until it’s too late. Some debt may be reasonable – for investing in real estate, for a college education, for purchasing a home. You can argue each, although I can just as quickly argue against each. But being debt free is one of the foundations of wealth, and if you can’t focus intently on that goal first, it may be a long time until you achieve financial freedom.

photo credit: TheTruthAbout…

how to get rich by choosing the right house

Laotian countryside
In The Millionaire Next Door – one of my favorite personal finance books – the authors point out that most millionaires live in nice homes in modest neighborhoods.

“It’s easier to accumulate wealth if you don’t live in a high-status neighborhood. … Perhaps you aren’t as wealthy as you should be because you traded much of your current and future income just for the privilege of living in a home in a high-status neighborhood.”

They also point out that many millionaires choose to send their children to private schools. My assumption is that they chose neighborhoods that were in less-than-desirable school districts, so the money they saved on a place to live was then pumped into the children’s education instead. You should choose a moderate place to live, amongst people who are not as rich as you are (or as rich as you aspire to become). Living below your means starts with a place to live.

Yet there’s another school of thought that says “you should dress to the job you aspire to obtain.” If you want to be rich, you should spend time with rich people (or people who have similar intentions to become rich). By rich, I don’t mean high-income, low net worth; I mean truly rich people who have high net worth and multiple sources of income besides a job (investments, businesses, etc.). You have to live amongst people who will inspire you, provide contacts and guide you.

Which way to live makes more sense?

Big fish, little pond

In this scenario, you choose a moderate home in a modest neighborhood. The money you save on a place to live is partially offset, perhaps, by a longer commute or an expensive private education for your children. You make sure that the place you live never becomes a burden on your ability to create wealth; you do not upgrade your home every four years or attempt to live in the best neighborhood in town. You know that spending money on a home in the best neighborhood in town is about status, not wealth – you will use the money you save on your home to build wealth. You want to be the richest man in your neighborhood in your late middle age.

Little fish, big pond

Looking at the opposite scenario, you find a place to live in the best neighborhood in town. You realize that having a good home and all that entails will be far more important in the long run than trying to skimp on what may be your biggest purchase ever. You feel that paying extra to live in the best part of town isn’t truly “extra” – it means good public schools, low crime, a healthy environment to live in. You want to live around rich people, to understand how they think and to move in the same circles. You want to be the richest woman in your neighborhood in your old age.

I think you can make strong arguments for both scenarios. It’s like the argument for buying used cars or new cars, or clipping coupons to buy name brands versus buying the store brand and skipping coupons. A lot of it may depend on personal preference. The direction you choose says a lot about your world view. I’d argue that the big fish, little pond people are almost by definition “classically frugal.” The little fish, big pond people seem more likely to be believers in Napoleon Hill.

Where you live shapes your worldview. When you buy a home as a young person or a young couple, you make your choices – and they aren’t always good. Sometimes they are just your best guess, and life throws you a curve (you bought a one-bedroom condo and right after the close you find out your wife is pregnant). Sometimes you close your eyes against facts you should consider (you buy an expensive home counting on next year’s raises to make the monthly payments affordable).

The answer is not black or white. But if you choose to live in a moderate neighborhood – according to The Millionaire Next Door – you’re following the path of most millionaires. The little fish, big pond people are – according to the stats – less likely to be millionaires. Yet they may be living more like millionaires. Only time will tell in your life if the choices you’ve made about homes to buy (or rent) will pay off.

photo credit: wili_hybrid

linklings, south towards home edition

This was a big week in the Blap household. We received notification that the buyers of our house put down their (rather substantial) deposit on our house; we finalized a lease on our new rental for the next eight months (before we buy a new house); we locked in a mover and we started some packing in earnest.  It looks like it will happen.  It’s going to be an interesting experiment in remodeling our lives over the next year.  I’m a little bit scared and excited at the same time.  You can’t make a big move like this, so far away from most of what you and your spouse (and kids) know without wondering how it will work.  I’m excited about the change in climate and hopeful about the change in lifestyle – but I’m nervous about finding new income (job or consulting or whatever) and being so far away from our families.  It wasn’t a move I could have imagined a few years ago, but I approach it like I have most of the moves in my life – it is motion, is moving forward, not standing still… and therefore a good thing.

March 2009 Was a Perfect Example of Why You Shouldn’t Try to Time the Market:  Indeed.  But I did, a little, doubling up one of my loser financial industry positions once it hit rock bottom.

Save Money on a Diamond Ring:  I can’t imagine going through this again – is it big enough, clear enough, pretty enough?  I’m glad I got a good diamond.

Eight Ways to Beat Bad Customer Service: I dread my upcoming encounters with customer service – canceling dozens of services and restarting them in a new location will be a lovely experience, no doubt.

How to Hedge Against High Inflation: I think inflation will be under control by 2010, but if not…

Six Simple Ways To Simplify Your Life: I sympathized with this article a lot (let me emphasize, A LOT) because I have the same ridiculous fantasies about moving to the country and living off the land and eating cheese I curdled myself.  Then I realize I don’t even know if cheese IS curdled or what curdling is and I barely keep houseplants alive, and I love my electronica.  But it’s a fantasy, so I don’t blame myself.  I figure I have time to grow into my inner Thoreau.

Frugal Entertainment Rule: You Must Try Redbox:  I see these things everywhere, too, and I just can’t see any reason to ditch Netflix…yet.  Then again, it does seem like a much faster and more convenient option, as long as you’re willing to get to the store on a frequent basis.

Credit Card Spending Down By 10%, Our Is Down By 50%: The most telling part of this article was that SVB’s spending is down because her stress-related medical spending dropped after she quit her job.

Last Minute Tax Deals: Mine are done, but I’ll wait – as I usually do – until April 14th or 15th to file.  I owe a tiny amount – less than $300 – so I figure there’s no rush to file.  I’ve finished everything, but I’ll wait to e-file until the last minute.  If you haven’t started, though – get on it.

Hey Big 4! If I Were You, Here’s What I’d Do (Instead…): If you know anything about the Big 4, this is a grim, grim article. I’d be worried if I knew anyone associated with this industry – or if you are, say, a shareholder in a company audited by one of these four firms, which includes most of the Fortune 500.

Why I’m Glad I Didn’t Kill Myself: Pretty amazing post. I can’t imagine going through that thought process, and it’s a touching piece worth reading. My blog’s named brip blap because I’m a very up-and-down person, but honestly, I’ve never – even in my darkest moments of depression – considered killing myself. I’ve always been, if nothing else, very interested in seeing what the future holds. I also suspect I am a bit too much in love with myself to do that. But it’s a brave thing to discuss, and Mrs. Micah deserves some kudos for having the guts to write about it.

PS: I am referencing the excellent book North Toward Home in the title of this post.  A lazy afternoon spent chatting with Mr. Morris on the front porch of a coffee house in a Mississippi summer haze is a fond memory of mine, and my best memory of talking with a writer.

networking is never about YOU


A former colleague (also a consultant) sponsored me for membership in a professional organization which has chapters all across the US.  I had heard of it but never participated before.
Being unemployed, I thought I would give it a try. So I signed up for the New York chapters, New Jersey chapters and Florida chapter.  I got a few emails from the New York/New Jersey chapters but mostly passed them over, particularly invitations to meetings and networking events.  I thought I wouldn’t stand to gain much from events like these since I’m moving out of state.

I traded a few emails with former colleagues over the weekend, including the one who had sponsored me, and was asked if I was going to any of the events. I said that with everything going on I didn’t see much point – I was busy preparing for my move, busy talking to recruiters and potential consulting clients and generally cutting loose from New York.  Considering my goal of moving to Florida I couldn’t see what value I could get out of New York meetings.

At that point my sponsor sent me an email where he pointed out to me that if I was expecting to attend any networking event for any group – ever – and my decision whether to participate or not was solely based on the value I would get out of it, then I wouldn’t get anything out of networking…ever.  He said it more kindly than that, but his meaning was clear.

I’ve written a lot of posts about job hunting, job jumping and even one of my most popular posts on getting a six-figure career. I’ve read Never Eat Alone. I understand how to land (and keep) clients and how to feign interest in a job interview.  But it’s easy, the longer you stay in a job or client search mode, to start looking at every single phone call and email and meeting and interview and thinking “what’s in this for me?”  “Why should I waste my time talking to this guy who doesn’t have a good lead?” The answer is always that it’s never about you.

If you only start your networking efforts when you need something, you’ll have trouble making a connection. If you start when you don’t need anything, but can hook people up with a job, they’ll remember.  If you make an honest effort to bring something to the table – and don’t expect anything in return – you have the right mindset.  Approaching any sort of connection with other people in which you think only of your own gain is bound to be a losing strategy.

Try to think of all of your efforts to find anything – a job, a significant other, a college, a place to live – not only in terms of what it can do for YOU YOU YOU but also in terms of how you can bring some value to that new relationship. Stop thinking of how everyone can help you.  It may work once or twice, but you will annoy someone eventually.  But if you freely offer help and advice and don’t expect anything in return people will understand that your assistance was not cynically offered.

So even though I knew I shouldn’t think of myself first, I fell into that trap and started thinking of my time and my needs.  My colleague reminded me that in order to do what’s best for you, you have to stop thinking about everything in terms of what’s… best for you.

photo credit: e³°°°

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