Here’s a financial lesson for anyone who participates in online social media of any sort. It’s a cautionary tale about online privacy; not the stalker-type issues that most people are worried about; instead, it’s about how you have to be careful to reveal too much online about business dealings.  I was catching up with some relatives who sold their house a couple of months ago, and they told me an amusing story that showed how they “made money” using Facebook…on their home sale.

My cousin Stan and his wife Elaine listed their house about six months ago. They had remodeled it and priced it to sell in a market that had been hit very hard by the collapse in real estate prices.  Fortunately, they weren’t in any hurry to sell; the mortgage was paid off, they were already living in their new empty-nest retirement digs, and the old house had no association fees and only minimal costs (low property taxes, some minimal lighting and heat for the winter, etc.)

They finally received a good but not great offer, accompanied by the earnest money check. No issues came up, and the usual back and forth of the negotiating process went on.  Stan and Elaine are older than I am but (like me, I guess) have stayed right on top of “the internets.”  After they received the check – with the prospective buyers’ names and address on it – it took Elaine about 5 minutes to find the buyer on Facebook.  She was simply curious whether they were serious buyers or not.

What did she find? Posts on their Facebook wall about how they had found their dream home.  How they would pay anything to get it.  Links to pictures – gushing comments from their friends and family.  In short, drool splattered (electronically) all over Facebook.  The buyers were even inviting all of their friends over for a big party the weekend after closing.  Elaine found all of this – before the final price had even been agreed on!

As you can imagine, this gave Stan and Elaine (a) confidence that the sale would go through but also (b) a gargantuan advantage in the ongoing negotiations.  Instead of being tentative and worrying about offending the (still potential) buyers, they were able to become far more resolute about refusing any concessions, changes in the contract or even agreeing to make changes based on (relatively minor) inspection issues.  They didn’t become jerks about it, but they realized that they had an advantage over the buyers.  That advantage translated into a financial gain when they were able to push back on every change not in their favor.  Presumably the buyers never knew about Elaine’s visit to their Facebook page – maybe they assumed she was “too old” to be on Facebook – but more likely they simply never thought of Facebook being used that way.  Maybe they just assumed Stan and Elaine were tough negotiators.

Of course, a similar situation can arise outside of social media – I once made the mistake of being a little bit too complimentary while viewing a home with owners present – Bubelah’s done it, too. But we knew they knew in that situation.  Maybe someone more Facebook-savvy than me could tell me that there are ways of monitoring who views your wall/profile/whatever.  I’m not sure I’d trust that, though, because a more tech-savvy person always lurks around the corner, who can hide themselves from that monitoring, and on and on ad infinitum.

Keep your mouth shut online while the deal is ongoing. I can’t think of any reason that blabbing about potential deals online can help you.  From the other party finding out and being annoyed (prices being revealed, locations being outed) to simple financial loss, how can you benefit?  I am not a social media junkie, but I keep a low-key presence on Twitter, Facebook and LinkedIn (as well as two forums, 48days.net and a blogging forum).  I have learned from Stan and Elaine’s amusing recollections of their home sale that it never hurts to assume that every single person on the planet may be reading your posts/tweets/wall messages, no matter how unlikely you might think that could be, and even the most harmless comments can have effects you couldn’t predict.

photo by kaibara87

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
how to make money on Facebook is an original article from the website brip blap.

I was rich as a child. Not really. I wasn’t. I lived in fairly plain conditions in subsidized housing. My family was poor enough that we used the residual heat from cooking to heat our home. I had to share a room with my brother. I didn’t get a puppy. We only had one car, and it didn’t even have air conditioning! And worst of all, I didn’t have a Wii.  Or high-speed internet, although it hadn’t been invented yet.

Now granted the subsidized housing was married student housing since my dad was still in PhD school when I was born. It was a cheerful, happy community with dozens of kids my own age. We did use heat from cooking to heat the house, but so what, why not? I never minded sharing a room with my brother – I assumed that’s how brothers were supposed to live! I didn’t get a puppy because I never really wanted one. We only needed one car because everything was close by, and most cars didn’t have air conditioning back then. And although I didn’t get a Wii, I did get a computer when I was 10 – a Tandy Color Computer – because my parents thought learning some computer skills could be useful if it ever managed to evolve into a useful device. Too bad computers never really took off, eh?

When I read the Science of Getting Rich, there was a passage that Bubelah pointed out to me that really struck me:

“Do not tell of the poverty of your parents or the hardships of your early life. To do any of these things is to mentally class yourself with the poor for the time being, and it will certainly check the movement of things in your direction. Put poverty and all things that pertain to poverty completely behind you. “

One of the memes of my financial life has been to proudly point out how my parents rose above their parents financially, and how I was rising above them (at least in terms of income – in terms of real long-term wealth they are still way ahead of me). This meme was always painted a massive struggle against near-impossible odds – primarily due to my big brain. I have been fond of telling people how I didn’t always have the big house and the big cars and the bling bling (does anyone still say that with a straight face)? I made it on my own! I never had STUFF! We lived in a SMALL PLACE! We struggled! We succeeded in the face of a harsh, cold world!

I got carried away. It’s true that I didn’t have a lot of stuff growing up. Having a small apartment for four people restricts storage space. We never really lacked for much. I don’t think I ever saw a book in a bookstore when I was a kid that my parents wouldn’t buy for me if I asked. A toy? That they might deny. But I really can’t remember anything in retrospect that I felt I lacked. Maybe at the time I wished I had the Schwinn X22 bike instead of the X21, but I can’t recall it now.

A few points:

1. Recalling your “poverty,” even for the sake of telling someone an inspiring up-by-the-bootstraps story, is putting a negative spin on your memories and a cloud over your future. Don’t remember your “lacks.” If you grew up in America, chances are good (although not 100%) that your “poverty” as a child was a lack of the coolest new bellbottoms.
2. Think forward, not backwards. Your childhood was a launchpad for who you are today. Are you improving your health, your wealth, your finances and your well-being? If so, your childhood was rich, because it gave you the tools to improve yourself now.
3. Talking about poverty will not make you rich, ever. If you spend time telling people about what you lack, you’ll continue to lack. If you don’t want to keep lacking stuff, go out and do something about it. Don’t whine about the poverty of your youth.
4. When you are 20 years older today, do you plan on telling people those were the lean years? I bet if you read this blog or any of the blogs in my blogroll you don’t plan on that. You PLAN on telling people that these were the years you brought the booyah. The early 2000s were when I got my shiznit together! Think about 20 years ago the same way. Even if it’s not 100% true, doesn’t it make you feel better to think that way?
5. Listen to rich people talk about their youth. Does Sergey Brin sit around complaining about being a Jew in Russia as a child, and having to emigrate when he was 6 years old?
6. Two out of every three billionaires made their fortunes from scratch. Being rich as a kid means you are LESS likely to be a billionaire. That’s an amazing thought.

I try as much as I can these days to think of what I had, not what I lacked. Concentrating on the things you didn’t have then, or don’t have now, is a sure way to be miserable.

photo credit: billy verdin

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
how to rise from poverty is an original article from the website brip blap.

Rewards cards rack up perks, but…

Okay, your rewards card may earn you enough miles to get to Hawaii once a year, but what are you really paying for that trip? Do you make credit card purchases simply for the rewards points? If so, those points are costing you debt you wouldn’t normally take on. Not very smart. But, if you were going to buy something anyway, and it happens to earn you some rewards points on your credit card, great!

The ratio of dollar spent to reward point earned will always tip in the credit card company’s favor. A good rule of thumb is to only charge what you would have charged otherwise, rewards or no.

Beware annual fees

Another way rewards cards can cost you is if the credit card company charges an annual fee on the account. I personally loathe credit cards that come with annual fees because the rewards are not usually worth it. Some people view elite rewards cards that carry hefty annual fees as a status symbol. I say let them have their prestige, and I’ll hold onto my cash, thank you very much. There are plenty of rewards cards out there that don’t charge annual fees.

If you don’t qualify…

If you can’t qualify for a rewards card without annual fees, focus on improving your credit score and stick to a debit or a secured card in the meantime.

Note that some people with lower credit scores may be able to obtain a rewards card, but they may have to settle for a higher interest rate. You’ll have to decide if the rewards are worth this higher interest rate (in most cases, the answer should be no). However, if you’re one of those responsible people who pay off the entire balance each month, then the interest rate is a non-issue.

Use a rewards card to boost your credit score

Like other credit cards, rewards cards can either bolster or destroy your credit score. Using them responsibly will earn you credit score points plus land you the cool perks. Here are some tips for getting the most out of your rewards card:

1. Read the fine print. Know the card’s APR, annual fee (if any), and the length of the card’s grace period before applying so you don’t get into trouble later on.
2. Don’t apply for multiple credit cards at once. Only apply for a new rewards cards if you really need it or if you are unsatisfied with your current cards. Multiple credit applications in a short time period can hurt your score.
3. Don’t charge stuff just to get the rewards points. This will land you in more debt than you can pay back.
4. Don’t pay an annual fee for a rewards card. They’re not worth it, and don’t have any extra benefit to your credit score.
5. Don’t max out your card. A high utilization rate will hurt your credit score.
6. Pay your bill on time each month. This is the single most important thing you can do with any credit card to help your score.

Choose the right card for you

When you’re ready to apply for a rewards card, make sure you choose one that has benefits you’ll actually use. Here are the main rewards card options:

Cash back credit cards: Some of these offer annual cash rebates that equal some percentage of the previous year’s purchases. Others not only offer cash back, but airline miles, gas rewards, and other perks.

Reward points credit cards: These are similar to cash back cards except you’ll receive “points” instead of dollars. Some cards offer points on every purchase you make; the more you spend, the more you earn. Gas companies and retailers often offer rewards points cards.

Airline credit cards: These are only useful if you do a lot of traveling. Airline cards are not good for those who carry a balance from month to month, as the interest rates tend to be high. These cards offer a form of points or air miles that add up to free flights for card holders. Beware of blackout dates and other restrictions when you go to redeem your miles, though.

What’s in it for the creditor?

As an aside, you may be wondering how credit card companies afford to give you these perks? If there is no annual fee for the card, and you’re one of those customers who pays down their balance in full each month, isn’t the credit card company losing money on you? No, actually.

Credit card companies make money several different ways; interest and annual fees are only two of their revenue streams. Credit card companies also charge a percentage of each transaction to the merchant selling you the service or product. So even if you pay off your balance each month, your creditor is still getting money from these merchant transaction fees.

A final note

Before you get too excited about a rewards card, keep in mind that you might see more “rewards” by not using a credit card at all. Studies have shown that using cash instead of credit is likely to result in at least a 12% savings. For whatever reason, we are more hesitant to part with our cash than to whip out a credit card. So while a rewards card that offers 1% cash back has its place for online purchasing and to help us build a good credit history, using old-fashioned paper money is probably better for your bottom line.

Carrie Davis is a personal finance blogger at SpendOnLife.com, a site dedicated to giving readers true and accurate information about credit, debt, and identity theft. She is FCRA-certified and has a passion for educating others on how to achieve financial independence. Follow Carrie through the SpendOnLife RSS feed or on Twitter @SpendOnLife.

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
all about rewards credit cards (guest post) is an original article from the website brip blap.

The estate tax – or the ‘death tax’ as it’s so cleverly nicknamed – has been a cause celebre for anti-tax proponents since it was enacted. What is it?  Read more here.  I’m not a tax expert, but as someone frustrated by taxes I feel free to opine on such things.  I would hope anyone who accumulated that much wealth in their lifetime would have the good sense to do one of a few things:

1. Plow that money back into their business in the form of capital expenditures, hiring good managers, etc. in order to leave a good income source to their children;
2. Donate to a local charity to leave their community better; or
3. Find a top-notch tax lawyer to protect as much of that money as possible in trusts…and failing all that,
4. Blow it all on electronics and cars.

And so on.  Failing to dispose of that money should result in a 100% “greedy” tax. Spend it on your kids before you die.  Buy them a house.  Buy them a college education.  Give away the money.  Hell, spend it on yourself. Don’t expect to pass it off in a lump sum to your offspring.  Whether or not that should be allowed is not the point – a democratic, egalitarian society generally doesn’t look favorably on the intragenerational transfer of wealth.

I know everyone hates taxes. I do.  I hate being called rich, when I live a middle class lifestyle.  I hated taxes even more when I lived in New Jersey and paid 10% of my income in property taxes and got horrendous failing public schools, horrible roads and shoddy public services in return.  Thankfully that changed when I moved to Florida.  But I also hate the horrendous imbalances of the progressive tax system (which fails to tax 50% of the citizenry who use the same publicly financed schools, roads and libraries as I do) and the horrendous unfairness of the (hidden) regressive taxes we all pay (think license plate fees, for example – Donald Trump pays the same for his Rolls as I pay for my 10-year old beater).  I don’t think poor people should be taxed at the same rate as the rich, but anyone who doesn’t pay income taxes won’t have a sense of ownership of their public institutions, so I think poor people should be taxed.  I don’t think Trump should have to pay more for his license plate than I should, but at the same time I don’t see why that tax isn’t treated the same as income tax.  Imbalances are rife thoughout the system.  Almost any tax will be greeted with the howls of those taxed, so…

…let’s make the estate tax 100%.  Let’s force everyone to utilize their money while they are still alive.  And let me know if you think I’m serious or not.

photo by Alejandra Mavroski

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
raise the estate tax to 100% is an original article from the website brip blap.

Are you the type of person who gets excited about new ventures? Do you like a challenge?  Many people have an ‘ah-ha’ moment when they decide to get out of debt, start living a frugal lifestyle and aim towards financial freedom instead of pursuing the  accumulation of stuff.  One more pitfall exists early on in this process:  over-thinking choices like the Roth or the traditional IRA.

There are differences, of course, and enough has been written about them that I’ll summarize it in one sentence:  the traditional IRA is not taxed, but is taxed when you withdraw it; the Roth IRA is taxed now, but not when you withdraw it; both grow tax free.  There are many subtle differences beyond that simplistic description.  Income limits may alter the favorability of one over the other.  The point most people miss, though, is that your choice doesn’t matter that much until you have a lot more money than most of us have.

You can find similar situations all over the place.  Should I invest with HSBC or ING?  What’s the best brokerage?  Should I have 3, 6, or 12 months of emergency funds?  What your decision is seldom matters as much as when you make it. I recently took the advice of a well-known semi-personal-finance blogger and opened up an interest-bearing checking account.  I resolved to switch all of our checking from a large bailout bank to this interest-bearing checking account, chasing 1.5% interest on our cash.  What happened?  After 6 months of inconvenience, confusion and frustration I shut down the interest-bearing account.  The effort to move the money, change all of the direct deposits, automatic payments and so on simply wasn’t worth it compared with a return of less than $75 per year. We have kept a low balance in our checking account for years, choosing to move excess cash to an interest-bearing online savings account.  The 1.5% – which sounded so much better than 0% – simply wasn’t worth it.

I worried that I was leaving money on the table, and consequently took time away from other, more important matters to chase $75. Spending time worrying about your retirement strategy can be almost as ridiculous.   You’ll see a lot of advertisements for brokerages advertising the lowest fees on trades, for example.  If you’re just starting out, find a low-fee brokerage and go with it.  But if you opened one up years ago (as I did) that charges $8.99 per trade, don’t bother to switch to a lower-cost brokerage.  As long as you aren’t a day-trader, you’ll be fine.

Much like the moment in The Matrix when Neo suddenly becomes aware of the ‘real world,’ many people have a moment of ‘financial awakening‘ that suddenly makes the world look like a little green-neon-streaming series of percentages and dollars and cents. The important thing is to learn to see beyond the numbers and realize that chasing more money is not, and never has been, the goal.  What we are really chasing is time.  Anyone can use time to accumulate money; the real trick is using your money to buy back time.  Agonizing over strategy rather than taking the offensive is a good way to lose the game.

photo by IcE MaN Photography

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
how to choose a retirement strategy – or not is an original article from the website brip blap.

1. Can I afford this stuff? Run down this checklist: I have paid off all of my debts; I have put money in my retirement accounts; I have paid all of the monthly bills; I have added to the emergency fund; I have healthy natural food for my family; I have shared money with those less fortunate than me. If you went down that checklist and answered “no” to any one of those, you probably don’t need stuff.
2. Do I need this stuff? Sometimes you need to buy stuff, but need is a relative term. If you have a hole in your gloves and winter is coming on, you might say you need new gloves. Fair enough – no one deserves frostbite. But you would have to ask yourself if you really need new gloves, or if perhaps you just need someone to sew up the hole in your current gloves. If you have holes in your underwear, though, I seriously doubt you are going to get far sewing them back up. You probably need new underwear. The concept is relative.
3. Will this stuff create or reduce clutter in my life? How often does this happen: you go to the store to buy a pan, and when you come home to make room you throw out an old one? Not often, I would imagine. Maybe the old pot is horribly scratched from scouring and it’s no longer useful. When you buy new books, do you give away old ones? Almost all of the stuff we buy creates clutter. In general, every time you buy new stuff some old stuff should go (which is not a good use of your stuff).
4. Does this stuff replace some other stuff that is still functional? Related to the point above, stuff should not replace functional stuff. I own a very old coffeemaker which still performs its primary function – making coffee. I would love a newer coffeemaker with more features, but at the end of the day I would hate to buy a new one while the old one still works.
5. Does this stuff somehow make a task or activity easier? We owned a toaster that burned toast. We did not like using it and making toast became a real annoyance. Finally Bubelah went and bought a new toaster. Now we can eat toast when we want it, and it isn’t burned. We also owned a horrible vacuum cleaner that cleaned nothing. We bought a new one and now we can actually pick up pieces of dust weighing more than .0000001 grams.  That stuff actually worked.  The old stuff didn’t.  Some of the stuff, therefore, was more useful.
6. Can this stuff help someone? There are times when stuff can just be helpful. Better tools are a good example. Flowers for a sick person are another. A better pillow for someone with a back problem is another. In those cases, the good done by the stuff outweighs issues of clutter or need.
7. Will buying this stuff hurt the environment more than it will help me? I cringe every time I buy a piece of consumer electronics – my USB flash drive is a good example. A flash drive is a tiny thing, maybe 2-3 inches long. When I bought my flash drive, it arrived in enormous plastic packaging 100 times the size of the drive – a huge rounded disk of hard, thick plastic. That plastic will go in our plastic recycling bin, but I don’t kid myself to think that all of that plastic is 100% recycled and finds its way back to new USB flash drive packaging. A large portion may end up in landfills or our oceans or our atmosphere. The oils and energy used to create that packaging are gone forever. Buying that USB drive, because of the packaging, was an assault on the environment. Many items are like that – and in fact almost all.
8. Is this high quality stuff or junk? Junk will need to be replaced soon, violating #3. Junk may not work correctly and help make an activity easier, violating #5. And it definitely violates #6. High quality stuff will last longer and do the job better. Knowing what’s high quality is often a tough question – maybe the JC Penny suit is tougher and more classic in appearance than the pink-pinstriped Hugo Boss, for example, making it of higher quality/durability. Evaluate this on a case-by-case basis.

I buy a lot of stuff and certainly don’t pretend that I’m perfect in this regard, but I am trying to move in the right direction. I try to ask myself these questions. If I can’t always answer them because of the “buy me buy me” chorus in my head, it doesn’t make me a bad person, just a person who still has room to develop.

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
8 questions to ask before buying ’stuff’ is an original article from the website brip blap.

Before I was married, I used to have a "local" in my neighborhood in Manhattan. That means there was a bar where I could drop by after work with friends and the bartender would have my usual drink set up before I even took a seat. The waitresses would stop by to chat, and I knew them by name. I would get the best seat in the house ahead of tourists waiting in line if I came in a group. The manager let me stay after hours, and invited me to special events.

If you have a situation like this, big tipping is tough to avoid. You get to know people and they provide wonderful, careful service on a constant basis. I never left less than a 15% tip even on rare occasions that I was dissatisfied, and 25%-30% was the norm. I got so many free drinks that often I would just take the amount I was given gratis and just hand it right back over to the waitresses or bartender.

Contrast this with stopping at a diner on an interstate trip. You get ho-hum service, perhaps, and ho-hum food. Do you leave a 15% or 20% tip like you would at a "local"? And if not, why? Would it make a difference if you knew that the cook got a fresh batch of salad out for your salad – and would it make a difference if it was just coincidence that he got it for you?

Tipping is an odd case of getting a service, then paying for it. If you hired a plumber to work on your house and said "you know what? I’ll pay you what I think it’s worth when you’re done" he would probably knock you over on the way out the door. Restaurant workers (and maid services in hotels, etc.) do the best they can to provide good service, not knowing if you’ll be the one-in-a-million person who leaves 10 $100 bills tucked under your check or the jerk who asks for 15 martinis and a steak done JUST SO before leaving a 3% tip. Imagine working at your job that way – if every payday you got a minimal base salary plus a "tip" depending on how happy your boss was with your work – or how annoyed he was that he dropped $1000 on the poker game last night.

It’s hard to balance tipping with being a frugal person. I don’t like tipping. I wish everything was a flat fee. I wish waiters and waitresses were paid minimum wage and I could write $0 for the tip without worrying about being a jerk. It’s easy if you’re a regular somewhere to be generous. If you live in Manhattan and have a super or a doorman, it’s easy to realize that you need their help, and they’ll give it whether you pay or not, so you SHOULD reward them for their help. It’s trickier when it’s the guy delivering the new couch. You’ll never see him again. He did his job. But it’s hard work, and maybe – just maybe – he could have dinged a wall or tracked in mud, but he took a little care not to.

I don’t know the answer. I generally tip generously at restaurants but not so generously when it’s "slipping cash" to someone, mainly because I’m embarrassed about it being too much (looking like a rube) or too little (looking cheap) so I often just pretend I "left my wallet upstairs." What I do know is that in general in life you’ll be a lot happier if you mentally price your tip BEFORE getting the service and then pay it that way after you get it. Think to yourself "I’ll tip the waiter 15% unless he ignores our table or gets an order wrong or forgets to bring us water," or "I’ll tip the housekeeping service $20 per day as long as the room is cleaned to a T," or "I’ll give that guy $50 to move the couch in unless he dings the wall or messes up the fabric," and so on. Tipping is an uncomfortable activity for most, and even more uncomfortable for someone who relies on them for a living.

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
should I tip or not? is an original article from the website brip blap.

(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 the racing car 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 adviser 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 the holidays (this is a rehashing of an old post of mine – between moving and the general chaos around the holidays I’m not writing much).

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
you know, you might be a personal finance redneck if… is an original article from the website brip blap.

After writing my post on my grandparent’s influence on my investing habits, my Mom clarified on how my grandfather got “into” investing and I thought it was worth a guest post. Lightly edited:  how a Depression-era farm boy got into stocks.  Largely in my mom’s words…

Your grandfather’s 8th grade teacher, Mr. Woodfin, who was also the “principal” of the two-room school house in Science Hill, Tennessee, taught his tiny class all about the stock market. He made them “buy” stocks and look them up in the newspaper (that came once a week).  Your grandfather, in other words, participated in a very early version of the stock market game. This would have been in 1932-ish, so the timing is very odd but that’s what happened.  Mr. Woodfin really indoctrinated at least one of his students, because your grandfather referred to him always when asked how he got interested in the stock market.  Never underestimate the influence that teachers have!

As for how your grandfather picked stocks, he had two kinds of stocks:  the ones he knew about (i.e. AT&T, Coca Cola, Pepsi, Ford, etc.) and the ones he didn’t know anything about (Intel, Microsoft, etc.). He did do a LOT of research but his main point of reference was the P/E ratio.  He went to the library (well, he sent his wife, your grandmother) and checked out one of those big S&P stock reference books to do his research (it was navy blue, and I actually bought him one for his very own for Christmas one year).  He did tend toward companies whose products he used (all of the above, plus pharmaceuticals, energy, and insurance).   But he was also quite interested in the future during his middle age and early retirement years, so the whole computer thing fascinated him and he would ask your dad which companies looked like the ones that would succeed.

With regard to buy-and-hold, it worked well up to a point. He bought Cigna, his usual 100 shares, for a couple of thousand dollars, and we sold it right after his death for about $100,000 (at your – Steve’s – suggestion) in order to lock in some cash for Mother.  So that worked well.  On the other hand, he bought Ford at $40.  He loved Fords, I love Fords.  But we all know what happened to Ford.  It is coming back, but I doubt Mother will live to see Ford hit $40 again.  But he could barely stand to sell anything, partly because he was so sure that he had selected good companies, and good companies will always triumph in the end (right…).  And secondly, he hated paying capital gains taxes, so he figured he’d pass them on to his descendants, or give them away to relatives and let them deal with it!

All in all, he did well. If he had been a little more aggressive about selling, he would have done better, but apparently Mr. Woodfin didn’t go that far in his stock market lessons!

The lesson I’ve always taken away from my grandfather was that careful study and disciplined investment meant a return on investment.  I don’t know if the paradigm has changed; it’s been rough the last few years.  But if you want to assume that the game hasn’t changed that much, invest in good companies, hold, and sell when the time is right.  It ‘s a tough strategy to dismiss.  It worked for my grandfather – on a “poor man’s” salary, he ended up with – for lack of a better word – financial freedom at the end of his life.

photo by kla4067

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
never underestimate the influence of a teacher is an original article from the website brip blap.

Citi is promoting a couple of new credit cards for students. I’m not averse to the use of credit cards at all, as long as you have and exercise the self-discipline to pay them off in full monthly.  If you’re the kind of person who doesn’t have that self-discipline, you should (a) avoid credit cards for the time being and (b) work on your self-discipline.

For a limited time, Citi has new credit cards that can be used to earn enough points for a $25 Gift Card and more! The Citi® mtvU™ Platinum Select® Visa® Card for College Students and the Citi® Forward Card for College Students are offering the opportunity to earn up to an additional 3,600 bonus points just for paying your bill on time and staying under your credit limit. This offer is only valid for new cardmembers who are College Students approved through this offer.  This offer expires January 15, 2010.   If you want to learn more, just  sign up here.

I like the fact that you get bonus points for paying your bill on time and staying under your credit limit. It’s not as good as getting points for paying the balance off in full, but by the time you’re a college student you either need to start learning how to use a credit card responsibly, or stick to debit cards.   Sign up here.

If you read brip blap via RSS, you might want to visit the site and see the new theme; if you like it, it's the frugal theme and if you buy it through that link, you help support brip blap.
Citi cards for college students is an original article from the website brip blap.