Monthly Archives: November 2011

What Are Local Currencies?

BerkShares

BerkShares

As a personal finance blogger, I follow economics and the ebb-and-flow of the capitalist system here in America, but I often ignore small trends that have global implications simply because they seem crazy on first glance. I’m as guilty as everyone else about missing trends because I think I know better.

Here’s an example: local currency. This sounds like a ridculous thing. You have a small town and within that small town, you have a non-US-dollar currency you can use to buy local goods and services. That’s the kicker: you can’t take that “local currency” to buy things at Wal-Mart.

A great example is BerkShares. BerkShares first appeared in in 2006 in the southern Berkshires region of Massachusetts. Since then, more than 2 million of these paper notes are in circulation. One hundred BerkShares can be purchased for $95 at one of five local banks and exchanged at participating merchants with the same purchasing value as U.S. dollars.

So what’s the point of a BerkShare? The program gives consumers an incentive to keep the notes active and shop and dine locally in the neighborhood businesses that accept them. Consumers get a bargain, and businesses can compete with multi-national corporations thanks to consumers’ preferences to buy local.

The fact is that local economies haven’t embraced the concept… but they should. We may never look at local currency and decide that it’s superior to “local deals.” I think we’ll have to see something far more dreadful happen to our national currency first – and I hope it never does. But movements like this are about transforming the institution of money. Encouraging consumers to focus on local purchases makes them support local economies, at a discount, which is a win-win for consumers and local businesses. Local currencies will become more and more important as time goes on, simply because there’s no way it’s not a winner for the community.

9 Effective Tips to Save on Car Insurance for Teenagers

car crash

car crash

Car insurance for teenagers can cost as much as five times more than the rates for adults. This is because of the greater driving risk involved in teenagers evidenced by greater number of accidents and higher number of serious injuries and fatalities compared to adult drivers.

In order to lower actual rates and maximize your teen’s auto insurance coverage, you can give your teen a simpler or older car; let your teen keep a good driving record; let him keep a clean insurance record; enroll him to a driver safety education; get your teen a safer car; let him maintain good academic grades; keep the mileage low; keep the car safe; and apply for multiple policies with your insurance company. To help you save on auto insurance costs for your teenager, here are proven tips you can consider:

Give your teen a simpler or older car

A brand new sports car would make a very nice birthday gift for your beloved teen, but if you want to save to insurance costs, this would not be a smart move. Remember that one of the factors that make up an expensive car insurance would be a brand new car because of its high book value. A sports car would also be expensive to insure with its higher horsepower compared to a four-door sedan. With a stronger car, your teen would tend to drive faster, making it more prone to accidents and damages. If you are giving your teen an older car model, you can also save by dropping collision coverage.

Let your teen keep a good driving record

If this is not your first year in getting your teen a car insurance and he or she had a good driving record, you can ask for a discount from your insurance provider. Most auto insurance companies give discounts to drivers who have not been issued a ticket or those who have not been involved in any accident since they have been driving. Remind your teen that it always pays to be a good driver.

Let him keep a clean insurance record

Aside from having a good driving record, insurance costs may also be lowered if your teen keeps a clean insurance record. It is advisable for him to keep from claiming for very minor car damages from insurance companies in order to avail of discounts.

Enroll him to a driver safety education

Some states require teenagers to get driving lessons first before he gets a driver’s license. Aside from this condition, the cost of getting a car insurance quote for teenagers may also be reduced if your teen had been enrolled to a driving course before driving his own car, most especially if he had good grades. The insurance company would most likely give discounts to responsible student drivers who have had lessons to safe driving than to those who have not.

Get your teen a safer car

Just like in applying auto insurance for adult-driven cars, discounts also apply to teenager-driven cars with safety features. Airbags, anti-lock brake systems, and alarm systems can help lower the insurance cost of your teen’s auto insurance as they reduce risk for injuries as well as theft and damages.

Let him maintain good academic grades

Yes, indeed. If your teen proves to have good grades in school, most especially if he is in the honor roll, you can avail of the good student discount. Most insurance companies offer this incentive to responsible students who are most likely more sensible and responsible too when it comes to driving.

Keep the mileage low

When you ask for auto insurance quotations, companies do ask for estimated mileage your teen has to travel from residence to destination, as well as estimated annual mileage. As much as possible, advice your teen to keep his mileage low and use the car only when needed. Do not encourage weekend road trips and the like. Higher mileage leads to higher risk of meeting accidents, thus resulting to higher insurance cost.

Keep the car safe

Another very important determining factor for insurance premium is the place where your teen brings and parks his car. Insurance companies will be asking where the car will usually be brought and parked. Is the school parking safe? Are the places he goes safe enough, too or are there many reported cases of car thefts and damages? If at home, does he park his car in a covered garage or just outside the apartment? Of course, the more risky the situation, the higher the insurance cost.

Apply for multiple policies with your insurance company

If your teen’s insurance provider with other concerns, such as life or home insurance, also covers car insurance and you get a policy from them, you may be given a discount on your auto insurance for your devotion to their company. Alternately, you can also apply for the whole family’s car insurance policies in one insurance company and be granted of discounts for each of your plan. Do not hesitate to ask your insurer about these discounts to save bucks.

Other discounts you may avail of with your teen’s car insurance include loyalty discount, if you have been with your insurance company for a certain number of years, as well as multiple car discount, when you enroll more than one car for your teen.

photo Attribution Some rights reserved by johntrainor

5 reasons to sell your house quickly

Here’s a UK perspective on selling your house quickly – it’s an interesting (and sobering) look at a serious situation.

Although nobody wants it to happen, for whatever reason you may be stuck in a situation where you need to sell your house quickly. Here are some of the reasons that you may have to sell your house quickly.

1) Divorce
The latest report from the Office of National Statistics has shown that the number of divorces in England and Wales is continuing to fall, but again, those in their twenties show the highest rates of divorce. The breakdown of a relationship is never pleasant, and often those young people who are ending a marriage will be unable to keep up mortgage payments separately, or afford to buy out their former partner. In these cases, the house must be sold, and the quicker it is sold, the quicker they can move on with their lives.

2) Illness
Illness or accident can take a financial toll on a family. Often families in these situations will choose to downsize to a home that is both more affordable and easier to take care of. In these situations a quick sale is always desirable, as it leaves families with more time to devote to the well-being of the ill person.

3) Debt
The latest research by Aviva found that on average, UK families have debt to the value of half their annual household income. That shocking statistic makes it clear why some families might choose to sell their home as quickly as possible so that they can downsize to a more affordable property and pay off some or all of their other debts. The quicker they can sell their home the less they will need to pay in interest.

4) Inheriting a property
When you inherit a property you may have to take over the mortgage payments or perform upkeep on it. Regardless of whether you want to continue living in your old home or move to the property you have inherited, you may find that you need to sell one of the properties quickly in order to keep above water on your mortgage payments.

5) Leaving the country
More and more of us are considering emigrating to another country. In fact, a recent survey, as covered by the Telegraph, found that nine in ten of us would seriously consider leaving the country some time in the next five years. While it might seem that this would allow a lot of planning, in fact you may need to pick up and leave quickly when you are offered a job. The last thing you want is to have to pay the mortgage on two properties at once while you wait for your old house to sell.

 

thinking big about investing

heights

heights

Foolish consistency is the hobgoblin of little minds.

– Ralph Waldo Emerson, Self-Reliance

When beginning any sort of ambitious self-improvement project – be it paying down credit card debt, learning a new skill, improving your health or reading the 100 greatest books of all time – you should have a clear idea of when to cut your losses and try a different path.

I have seen many people attempt to avoid quitting at all costs. You know the type – your friend who insists on watching the movie to the end.  Your cousin who will eat the same dish that gave him heartburn last time.  People who furiously pay down debt by directing every last penny to their debts while eating Ramen noodles.  Being someone who can stick to a goal and achieve it is admirable.  But there are times when it’s not admirable.  Being someone who sticks to a goal that no longer has a clear benefit is foolish.

The best example in terms of personal finance can usually be found in investing.
Many investors will establish a pattern of investing that suits them, and then defend that pattern to others (and to themselves) even if it doesn’t work.  A good example is mutual fund investing (or even investing in stocks).  The conventional wisdom is that “market gurus” exist.  Bill Miller’s Legg Mason Value Trust beat the market for 15 years and looked like a gold mine (and made Bill Miller a rich man).  Since 2005, though, that fund has lost 60% of its value.  The truth is that index fund investing is the investing pattern with the best possible return for a non-knowledgeable investor.  But far too many people continue to cling to the idea that the market can be “beaten.”  It can’t, unless you’ve got the time to focus on studying the market 24/7.

A foolish consistency – an attempt to hew to a failed philosophy – is going to be the road to failure for most of us. If what you’re doing isn’t working, it’s unlikely that it’s going to improve.  I know that persistence is considered to be a virtue, but in investing or life it isn’t.  You have to admit that what you’re doing isn’t working sometimes, and try to find an alternative.  In investing, this is called cutting your losses.  If you invest 10,000 and lose 2000, you need a 25% gain to recoup your 20% loss.  Think about that.

So think bigger. Think about moving past goals.  Think about ambition and think about money like something new, every day.  I’m constantly reevaluating my goals and my ideas about how to generate (and grow) my money, but not as much as I should.  If you get to a point where you’re comfortable, you’re in bad shape.  Life requires growth, in one form or another.  Think bigger.

Photo Attribution Some rights reserved by striatic

25 quotes on perseverance

fire twirlers

“Success is not final, failure is not fatal: it is the courage to continue that counts.” -Winston Churchill

“Perseverance is not a long race; it is many short races one after another.” – Walter Elliott

“No man is ever whipped, until he quits — in his own mind.” – Napoleon Hill

“I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature.” – John D. Rockefeller

“When you come to the end of your rope, tie a knot and hang on.” – Franklin D. Roosevelt

“It’s not that I’m so smart, it’s just that I stay with problems longer.” – Albert Einstein

“With ordinary talent and extraordinary perseverance, all things are attainable.” – Thomas Foxwell Buxton

“Great works are performed not by strength but by perseverance.” – Samuel Johnson

“Energy and persistence conquer all things.” – Benjamin Franklin
“Even after a bad harvest there must be sowing.” – Seneca

“For all things difficult to acquire, the intelligent man works with perseverance.” – Lao Tzu

“The characteristic of a genuine heroism is its persistency. All men have wandering impulses, fits and starts of generosity. But when you have resolved to be great, abide by yourself, and do not weakly try to reconcile yourself with the world. The heroic cannot be the common, nor the common the heroic.” – Ralph Waldo Emerson

“If you stand up and be counted, from time to time you may get yourself knocked down. But remember this: A man flattened by an opponent can get up again. A man flattened by conformity stays down for good.” – Thomas J. Watson, Jr.

“Thankfully, perseverance is a good substitute for talent.” – Steve Martin

“Saints are sinners who kept on going.” — Robert Louis Stevenson

“If we are facing in the right direction, all we have to do is keep on walking.” – Buddhist Saying

“Paralyze resistance with persistence.” – Woody Hayes

“My great concern is not whether you have failed, but whether you are content with your failure.” – Abraham Lincoln

“What saves a man is to take a step. Then another step.” – C. S. Lewis

“My motto was always to keep swinging. Whether I was in a slump or feeling badly or having trouble off the field, the only thing to do was keep swinging.” – Hank Aaron

“The difference between perseverance and obstinacy is that one often comes from a strong will, and the other from a strong won’t.” – Henry Ward Beecher

“Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan, ‘press on’ has solved, and always will solve, the problems of the human race.” – Calvin Coolidge

“What counts is not necessarily the size of the dog in the fight – it’s the size of the fight in the dog.” – General Dwight Eisenhower

“Great works are performed, not by strength, but by perseverance.” – Dr. Samuel Johnson

“If I had to select one quality, one personal characteristic that I regard as being most highly correlated with success, whatever the field, I would pick the trait of persistence. Determination. The will to endure to the end, to get knocked down seventy times and get up off the floor saying. “Here comes number seventy-one!” – Richard M. Devos

“Keep on keeping on.” – Edgar Allen (founder of Easter Seals)

You can also check out 25 quotes on ambition here on brip blap.

Photo Attribution Some rights reserved by Dominic’s pics

how to predict the stock market

crystal ball

Note:  This post was originally written in March 2008 (before the, ahem, “problems”), but I’ve updated it slightly for today’s conditions.  It’s amazing that when I originally wrote how to predict the stock market, it was contrarian advice, and a few commentators took me to task on my semi-prediction that double-digit returns couldn’t continue.  What’s funny is that 10% was the commonly used return on investments cited by most bloggers pre-2008, including probably more than once yours truly.  It’s amazing to think how poorly humans predict the future.  I’ve added more commentary at the bottom.

Back to my past attempt at predicting the stock market…

Quoting directly from an annual report is not something I’ve done before on Brip Blap, but I thought this little nugget from Berkshire Hathaway’s CEO Warren Buffett was worth sharing. Friday’s [2007] annual report to shareholders is available on Berkshire Hathaway’s website.

From Fortune:

[Buffet] writes that the Dow Jones Industrial Average surged from 66 to 11,497 during the 20th century. That is a huge rise – yet it averages out to just 5.3% compounded annually, Buffett writes. What’s more, were the DJIA to repeat that 5.3% average annual gain throughout the 21st century, its value on Dec. 31, 2099, would approach 2 million.”It’s amusing that commentators regularly hyperventilate at the prospect of the Dow crossing an even number of thousands,” he writes. “If they keep reacting that way, a 5.3% annual gain for the century will mean they experience at least 1,986 seizures during the next 92 years. While anything is possible, does anyone really believe this is the most likely outcome?”

If that scenario isn’t outlandish enough, Buffett goes on to note that were stocks to return 10% annually throughout this century, the Dow would hit 24 million by year 2100. “If your adviser talks to you about double-digit returns from equities,” he writes, “explain this math to him – not that it will faze him. … Beware the glib helper who fills your head with fantasies while he fills his pockets with fees.”

I’ve written about this before. I am constantly amazed at the optimism people bring to the concept of long-term guaranteed double digit returns in the stock market if you invest in index funds. I am even more amazed that people hope for the US market to continue at these rates of growth, since I think the explosive days of US growth are behind us, as a country. The simple truth is that unless you are a very good investor (and they exist – I don’t deny that) you probably can’t beat the market. 75% of mutual fund managers can’t, either. What is most likely is that you can count on a before-tax return of less than 6% per year – before taxes.

I know the DJIA is probably not the best single measure of returns, and I know different time spans would result in different return rates, and I know there are variables such as tax treatment, dividends, etc. that might affect this calculation. But the best investor in America (if not the world) thinks that counting on the general return of the market to exceed 5.3% is foolish, and I have to pay attention to his opinion since he seems to have a good understanding of investing, to say the least.

I use the “index fund method” of investing, buying broad-based index funds that mirror the performance of the market. If I look back in 20 years and see 5.3% returns per year I will kick myself for not buying CDs instead and avoiding the volatility which is giving me nightmares today. I sometimes wonder if I do need to put more effort into actively picking stocks, instead of hoping for the lift and swell of a troubled, debt-ridden country’s over-regulated stock market to carry me to retirement. It’s enough to make you sleepless at night in times like these.

Back to the present where I again try to guess how to predict the stock market….

 

Now, if you’ll re-read that last paragraph, you’ll note one bit of stupidity on my part.  Can you guess it?  I’ll give you a hint – if you’ve read my blog over the past few years, do you think I still complain about an over-regulated stock market?  I don’t even know why I said it then, except that I was caught up in the hideous mess that was Sarbanes-Oxley – a boondoggle for consultants and auditors if there ever was one.  SOX was over-regulation in the sense that it required a huge amount of work and produced (in my opinion) almost no improvement in corporate governance or controls (see: 2008 Wall Street meltdown and bailouts).  To the best of my knowledge all the big Wall Street disaster firms were fully SOX compliant.  So I’ll give myself half a pass there.  But it’s clear over-regulation has never been the problem.  Maybe under-enforcement is, but over-regulation?  Nooope.

What do we have to look forward to in the future?  The stock market has returned roughly 40% since Obama took office.  40%.  With unemployment up, debt up, trust in our institutions down, the stock market still goes up.  Is it confidence in Obama?  Confidence in Wall Street?  Or is there simply nowhere else to go?  Real estate and “high yield” savings accounts are battered and broken.  CDs are laughable, and paying down a mortgage at 3.5% interest seems misguided.

Part of me says it’s all smoke and mirrors, and part of me says “if you can’t beat them, join them.”  You make your own decision, of course, but the only thing we can be certain of is that the future is uncertain.  I cynically sometimes proclaim that the only sure investments are canned goods, shotguns and shells.  But the reality is that the market will go up because that’s where the money is, and we won’t have much choice except to follow it (unless we want to attempt various early retirement options, which may be the best answer).

(If you liked the post, please Tweet/Like/etc. using ShareThis, or of course feel free to comment!)

Photo Attribution Some rights reserved by Frogman!

How Much Does It Cost to Die?

tomb tombstone grave graveyard crosses

When I first started looking at this, it cost anywhere from $6,000 to $10,000 to die in New Jersey (note that I said “to die”, not “to kill someone” – we weren’t all captains in crime families in the Garden State where I used to live, although we did have our fair share and even some favorite sons).  I haven’t done the same calculation for Florida, but I work on the (possibly naive) assumption that Florida should be cheaper.

Nobody wants to confront their own mortality, of course. My guess is that it’s probably right down there with cleaning septic tanks and reading children’s toy assembly guides on everyone’s list of least favorite things to do. But you have to stop and think about it for a second if you have a family – and even if you don’t.

If you are single, you may not have life insurance. If you are married, you may not even have started working on this yet. If you are married with children and don’t have life insurance, you need to go talk to an agent rather than reading this post. But life insurance may not always cover all of the costs, and you may leave behind a huge financial hit to your loved ones if you haven’t prepared properly. There is nothing more grim than planning your own funeral down to the last detail… except leaving your loved ones to do it for you. Think about a few of these things:

1. Burial? Cremation? A flaming ship pushed out to sea, Viking-style? You have to make your wishes known. You may assume that you’ll be buried in the family plot or have your ashes scattered to the winds, but have you told anyone about that? Can you imagine leaving that decision up to someone else, particularly in a moment of grief?

2. Taking care of the costs should not be a concern for your survivors. Can you imagine being a spouse or a parent or a child and trying to talk to a funeral director while doubled over in grief? Is that going to be a time that they need to be making decisions about money? Make sure that you take care of picking out a casket, or a mausoleum, or an urn or whatever it is you will need – but don’t leave that decision to your survivors.

3. Have money set aside as “go to hell” money. Make sure that you have an emergency fund well-funded or a separate account altogether (a “disaster fund” maybe) so that nobody has to worry about going to work or taking care of flying relatives into town – those details should be taken care of without worrying about the cost.

A confession – I haven’t been as diligent about doing these as I should have. I know I should, since I have a good example in the family. My grandfather had taken care of every single detail of his funeral 30 years before he died, to ensure that when he did absolutely no pressure to determine anything would fall on my grandmother. It was a brave thing to confront his mortality at such a young age (in his 40s) and certainly made a world of difference for all of us when he passed. He had expressed all of his preferences, leaving almost nothing to the imagination.

So just remember “worrying about death expenses” as item #675 on your list of a thousand things you need to plan for but haven’t yet.

(photo credit: robin.elaine )

3 Things I Wish I Was Told As A College Freshman

studying


Today’s guest post comes from Jenny. In her own words: “I am currently a junior in college and living in New York City. Going through the job recruitment process now has made me reflect a lot on the past 3 years of my life. Here are some things I wish I had been told on day one:”

Pick a major you love, not necessarily one that is related to the career you think you want.

There is a very simple reason for this: if the subject is something you enjoy learning, you will inevitably be good at it and that will lead to a high GPA. From experience, I can say that GPA has been the very first factor used by both large and mid-size firms when screening applicants’ resumes and thus is a deciding factor in landing your first internships and full-time jobs. It is to your dual advantage to have a high GPA while studying what you enjoy.

But what if I am a biology major and want to go into the financial services industry, you ask – shouldn’t I major in economics or finance? Not at all.

See, with all of the competition in today’s job market, companies have grown to love the “story hires”. These are people who have a story as to why they have decided to change their career path or explore other options and that makes them more interesting to employers and well-rounded as individuals. I know for a fact there are people working at one of the top investment banks on Wall Street right now who actually have medical degrees and used to be surgeons.

You can major in whatever you want, as long as you are able to talk about “transferrable skills” you acquired along the way that are relevant to the job.

Have a 5-Year Plan.

Although this is not Soviet Russia under Stalin, it is important to have an idea about what the next 5 years of your life will look like. I was blind-sided when my junior year of college rolled around, summer internship recruitment season was in full swing, and all of sudden all of the interviewers expected me to know exactly what location, what division and what group I want to work in. I felt like I had to decide the rest of my life in just 2 weeks.

Very often when young adults start college, they are advised that they should use this time (all 4 years) to explore. Though I am in no way against this, I do believe that “exploring” should be done in a specific direction. Because at the end of those 4 years, everyone will want the same thing: a job to start their career.  The people who have done the research, know what to expect, and have a clearer sense of the direction of their career are in a much better position.

Take a few minutes to plan what classes to take when, which school clubs may be good to get involved in, and start talking to upperclassmen about their experiences so you know what to expect.

Start Talking to Upperclassmen About Their Experiences

Upperclassmen are a seriously under-valued and untapped resource for underclassmen. These are people who were just recently in your shoes and have survived it unscathed and that much wiser. Why not ask them about it?

A lot of times first-year (and second year) students are intimidated by upperclassmen and tend to shy away from interaction, let alone asking for advice. I remember I used to think upperclassmen were so much smarter and so busy that they could not possibly relate to me. Well, with time I have learned that all it takes is some courage to ask a question and the rest works out. You would be surprised how incredibly willing people are to give advice if you just ask for it.

I recently adopted a freshman buddy in this way. I was at an event and this girl sat down next to me, we started talking, and she later asked for my telephone number so that she may call me if she needs advice. I gladly gave it to her and now she texts me whenever she has questions.

The next time you’re in class, at a club meeting, sporting event or a company presentation, approach an upperclassman and ask a question. They were in your shoes just a year or two ago and can give you so much information about the right classes, professors, clubs, and internships that you would never be able to find on Google.

Jenny is a undergradute finance major attending college in New York and a first-time contributor on brip blap.

Photo Attribution Some rights reserved by lethaargic

how to ride a hot streak into the ground

A few years ago I went on a cruise to the islands with my wife, Bubelah. We decided to stop in the casino briefly one evening, even though neither of us are gamblers – I generally find it boring and she generally doesn’t understand it. It was ‘formal night’ on the cruise, which for you non-cruisers means tuxedos for the men and evening gowns for the ladies. So we swept into the casino looking every bit the James Bond – Bond Girl bit, right down to the dirty martini I ordered (shaken, not stirred, which is genuinely better). I know the rules of blackjack (not how to win, though) but Bubelah didn’t so we decided to play roulette instead. We put down $20, and through a few lucky spins we built up to $400. Not wanting to miss the reception, or push our luck, we kindly cashed out and happily decided that at least we had defrayed the cost of the cruise a bit.

On our next cruise, we decided to try our luck again, but there was no formal dinner to attend on the particular night we went, so we were in no rush. We spun, we lost. We put down another $20. Ciao, bella. Another. In the end, we had a 100% loss on a $60 investment, versus our original 2000% gain on a $20 investment. The loss happened JUST AS FAST as the gain – 3 spins. That original winning might have gone to $0 on the next spin.

This anecdote, however, is NOT the point of this post. In the mid-90s, I bought a tech stock in my retirement account. This was back in my “mindless” investing days; I saved money, but I did it almost unconsciously, seldom putting much thought into strategy or even rational behavior. So I bought $2000 worth, if I recall, which was the one-year limit on IRAs at the time. I forgot about it.

A couple of years later, it had soared – my money had almost tripled. The stock wasn’t paying a dividend, but I thought I was brilliant. I let it ride. It stayed up. “Excellent work,” I congratulated myself. “You are the next Warren Buffet.” Then it started to slide a bit. Then, as the dot-com bubble burst, it slid a LOT. Finally it was back down to my original purchase price. I said “well, I might as well stick it out now,” thinking that it might someday come back. It didn’t. It stayed stagnant for another couple of years before I sold it, more or less at the purchase price.

Buying a non-dividend paying single stock in an IRA was not a wonderful investing idea. It could have easily appreciated tax-free outside of my retirement account, and I could have used that IRA money with a dividend-producing stock, a mutual fund or any one of a million different things. But I did not. If it had been a dividend-paying stock, I would have at least collected some tax-free dividend income while it languished. But it wasn’t, and I didn’t. And unlike the time I played roulette on the cruise, I didn’t recognize a fantastic streak of good luck for what it was and tell myself “sell this speculation! It doesn’t pay dividends and you never expected in your wildest dreams for it to triple in price – unload it! Lock in the gains!” I missed a chance to invest wisely, and when my first poor decision resulted in a fantastic windfall, I failed to cash it in, making a second poor decision.

In the end, it was a profitable experience, though, because I learned from it. I learned to put a little more thought into an investing strategy, including my idiot-proof stock sell point calculation (more on that in the future, but basically once it goes up 25% or down 15%, start selling some of it). I also learned that sometimes the smartest financial decision, just as in gambling, is to get up and walk away from the table.

(photo by adewale_oshineye )

reading more, and links

I may not do many more of these roundups – I’m not sure how much value you, as readers, get out of them.  I do read a lot of interesting stuff on the internet but it’s easy to get overwhelmed, and so I don’t know if I’m doing more harm than good by adding a few more links that you ought to click through and read every week.  But hey, this is how the internet works… I read stuff and like to share it.  Hope you like it too.

a money parable that doesn’t make sense

appetizers

The owner of a successful small business in his hometown had two sons. The younger son asked one day if the father could lend (really give) him a substantial amount of money. The father, being the trusting sort, gave him the money without asking why he needed it. The younger son took off for a distant big city where he spent everything and then ran up substantial credit card debt on top of that. The economy in the big city went south and he had trouble paying for his pricey condo in a “hot” neighborhood. Things got so bad that he took a job in a restaurant and started eating food that people left on their plates.

The young man said “My father has so much money, and I’m starving! I’ll go back to him and apologize and even offer to work for him.” So the young man went home. His father was overjoyed to see him. The young man apologized for his wasteful behavior, and asked to be forgiven. He said he wasn’t worthy to be his son anymore.

The father instead took him to a fine men’s store and bought him a new suit. He gave his employees the day off and took his son and his employees to a fine chain restaurant and threw a party, ordering many delicious appetizers.

Now all this time the elder son, who also worked for his father, was attending to business with an important client. He had worked hard all of these years for his father’s business. He had never asked for anything – he had worked hard, lived below his means and saved for the future. When he checked his Blackberry, though, he noticed that everyone took the day off and was partying at the Outback.

He fired off an email on his Blackberry to his assistant asking what the occasion was. “UR bro is back & we R throwing a party :)” replied the assistant.

The elder son was furious. He drove to the Outback but sat outside, sulking. His father came out and begged him to come in. The elder son was in no mood to hear this. He snarled, “I’ve worked for you for years. I’ve never done the least thing to embarrass you. I’ve provided for myself and my family, I’ve grown the business, I’ve never gone into debt – and you never threw a party for me at Red Lobster, let alone the Outback.”

“But my little brother blew through YOUR money, spending it all on strippers and appletinis, and yet you’re throwing a party for him.”

The father considered this, then said “Listen, you have been a good son. When I retire, my business is yours. Everything I own goes to you in my will. But we should be happy. Your brother, who had disappeared, is back. He was lost, but now he is found.”

The end.

My story is (of course) a modernization of the parable of the prodigal son. My question is this: is the father’s debt forgiveness really consistent with what we expect as people who pay attention to personal finance? Isn’t it really unfair to reward the younger son’s debt? He’s not a bad person, maybe, everyone makes mistakes – but isn’t the elder son right to be annoyed? Why didn’t they even see fit to invite him to the party? Or is this the whole point of the idea of recovering from substantial debt – that, in a way, the battle to escape debt is worthy of celebration? I guess maybe it’s also about the fact that your love of family should be greater than your love of money (or hatred of waste), but it’s tough for me to grasp.

Photo Attribution Some rights reserved by missmeng