Tag: income

linklings, small business energy edition

I’m jumping the gun on something I’ll write about more next week, but I attended a very interesting function this week. It was a launch party for a magazine in which I was a contributing writer, and most of the attendees were entrepreneurs, small business owners or reps of banks and other service companies (payroll, etc.) who served small businesses. The energy and enthusiasm of people with an entrepreneurial bent versus a similar gathering of corporate types was stunning.

I’ve been to entrepreneurial gatherings before, and attended more corporate events than I can count, but this event reminded me how different the energy is between the two. And I’m not bashing corporate types out of hand; even though I’m not a corporate employee I’m still firmly embedded in corporate life, and consider myself part of corporate culture rather than entrepreneurial culture. I was impressed by the people I met and made a resolution to start spending more time at networking events for entrepreneurs and less mixing with corporate types, even though that’s where I get my work. Sometimes it’s about inspiration, not trolling for clients.

On to the links:
Census Pre-Notice: Government Waste At Its Finest.: This letter absolutely appalled me, as well. This letter, in fact, is the type of thing that makes me sympathize for a few seconds with the ‘small government’ crowd. Whoever the moron is who decided to send out this letter
Implementing PAYGO Rules For Personal Finances: Don’t buy something until you either make more money or save on something else. Radical concept. I don’t approve of the politics behind the recent shenanigans to block the extension of unemployment benefits, but why this is such a radical concept for DC explains a lot about the mess our country’s in.
How to Negotiate Remote Work With An Employer: This is the holy grail for me. Sometimes I manage to convince clients to let me do this, but more often than not they are stuck in “facetime” mentality.
How to Waste $55 in Washington D.C. (Hint: Take a Bus Tour): I have to be honest - all of the monuments and memorials and whatnot in Washington bore me, with two exceptions: the Vietnam War memorial (which is deeply moving) and the World War II memorial, which - for me, at least - was “off-the-charts” moving. Seeing that and seeing the eternal flame outside the Kremlin, which honors the dead of what they call “The Great Patriotic War” is overwhelming when you think of the number of Soviet and Allied forces who died defeating the Axis. Chilling stuff, particularly given that my head is stuffed full of World War II stories from my mother’s father, ranging from the noble to the horrific. My father’s father refused to speak one bit about it - being a German-American, speaking German at home and being sent to the German front was apparently not something he ever felt like discussing with anyone.

A few other good reads:

linklings, sneezing leads to a CAT scan edition

I’m a bit late with this week’s link roundup (surprise) but I have an excuse. As I was driving to work for an early morning meeting on Tuesday, a heavy, driving rain broke out. The pitch black, heavy rain and early hour (about 6:30) would have been bad enough but my windshield wiper chose that moment to whip off the car. I had to go retrieve it in the pitch black, driving rain and 70 mile-per-hour traffic and then use a small pair of pliers to try to work it back on - all in cold weather with a light windbreaker on.

Needless to say I was soaked. Traffic accidents on I-95 extended my cold, shivering wait in the car to two hours. After spending 20 minutes in the gym locker at work with a hair dryer on me, I felt more or less OK. Then…. bam. About 24 hours later, I felt sick. I visited the urgent care clinic and got some help. 24 hours later, with my blood pressure soaring, severe sinus pain and serious weakness, I was off to the doctor. I had to get a CAT scan to rule out a stroke, but apparently it was just my body’s reaction to the infection. My blood pressure’s been normal for 7-8 years, and was just checked about 3 weeks ago so the surge was weird, and made the doctor double-check with the CAT scan. Not a fun experience. On the bright side, with some antibiotics and a brief course of blood pressure medicine I’m back to feeling more or less normal today (120 over 70 type blood pressure, and sinus pressure greatly reduced).

Too much information?

Well, just wait til you see the boatload of links I’ve got:

  • Running Up Debt: Never having been in debt other than mortgage debt in my life, I’m always slightly fascinated by other people’s stories of debt spiraling out of control.
  • Are Over Half of Workers Really Dissatisfied with Their Jobs?: Doesn’t surprise me, simply because most of us believe our job should pay a bit more, the boss should be a bit nicer or the guy in the next cubicle shouldn’t tap his pen all day long.
  • Do Something You Love, Before You Have To Do Something For Money: Amen - which is why you should go to an inexpensive college, preferably public, and get out of school without needing to go to work immediately to pay off $80,000 in student loans (or more).
  • Crock Pot BBQ Pulled Pork Recipe for Under $15 – Easy and Frugal: We just got a Crock Pot (actually the exact same one Jeremy has in this post) so I’m going to have to give this a shot. Nothing like pork for healthy eating!
  • To Succeed Financially, You Must Know Yourself and Know Thy (Financial) Self: Closely related articles, and both worth considering: you need to understand yourself before you attempt to change yourself.
  • What Happened to Patrick? A Few Thoughts About Blogging Anonymously: I’ve written about my struggle with anonymity before, and Ryan (who is the “real Patrick”) over at Cash Money Life finally gave up on anonymity, giving out his full name right there on the blog. Not a bad idea. You can find my real name without much trouble, but I still haven’t just slapped it up on the blog. Patrick Ryan’s probably right - anonymity won’t do much for furthering your online “brand.”
  • The Curse Of Making Too Much Money And Not Pursuing Your Dreams: I sympathize with Lyndon in this post. I make enough money that dropping my current lucrative career seems insane, even to follow my dreams (which aren’t that firmly defined, but that’s a separate question).

Some more good reads, but now I’ve run out of steam to comment…

americas-richest-counties: Personal Finance News from Yahoo! Finance: And finally, a nice little bonus read on a statistic that always kills me. “Highest income” is a radically different concept from “richest.” I had a high income in New Jersey, but my expenses were proportionately higher. If you want to get a true look at “richest” you’d have to incorporate some sort of cost-of-living metric.

linklings, informal survey edition

I’ve struggled recently with topics. I started brip blap writing about many “typical” personal finance issues: money management, frugality, economic issues, and so on. I’ve also written about health, careers, productivity and family.

So here’s the survey, and I would sincerely appreciate any input: would it help or hurt brip blap to add additional writers (I’d stil post as much, but add a post or two from another writer each week)? And would it help or hurt to focus in on a narrower range of subjects, or do you just enjoy my random outbursts?

If you don’t want to comment, email me at bripblap@gmail.com or catch me on twitter @bripblap - or even call me if you want:

If you’re an RSS reader, launch up the site. I’ve got a new theme. Love it? Hate it? You love it, because I worked on it and don’t plan to change it back, OK? I’m not Chad Ochocinco, promising to change my name if I get locked down on Revis Island (and he DID get locked down, and he’s not changing his name back to Johnson).

Sorry for the NFL reference that will elude a lot of you… on to the links…

Michael Lewis: Wall St. Is Done: No, it’s not. It’ll be right back.
Want to Work for Free? Start a Business: I started off slow, earning money with this blog (and others) and haven’t advanced my earnings to the level of the “big” bloggers; but I do try to remind myself that I’m doing fairly well compared to 90% of the other bloggers and online “webpreneurs” out there.
Pros and cons of being wealthy: I really enjoyed Felix Dennis’ book, and it should be a must-read for anyone who dreams of being “superwealthy” as opposed to merely rich.
How To Create A Blog For Fun Or Profit: I recommend “for fun.” You won’t profit for a while, and if you don’t enjoy the subject you’ll have trouble with keeping it up. I’m bored with personal finance, for example, so writing about it is a struggle. Frugality is even harder to write about. Career and life issues are a lot more important to me these days, hence the question above.

…oh wait, a few more…

photo by Eleaf

how to rise from poverty

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.

Creative Commons License photo credit: billy verdin

raise the estate tax to 100%

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

how to choose a retirement strategy - or not

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

is life fair?

Can citizens in western societies strive for wealth at the same time society tries to be ‘fair’? Let me give you a few situations, and in each case think whether society is being ‘fair.’ Fair is a loaded word, but just assume for the time being it means that all people have equal outcomes for similar actions.

  1. A college graduate, well-educated about personal finance and the economy, decides to burn through everything they earn right now, saying “Why save for later? I’ll have fun now and hell with consequences.” Should society be responsible for his medical care and living expenses when he is 70 and can no longer work or care for himself adequately? If someone chooses to smoke and doesn’t insure himself, does society owe him health care?
  2. A child is born with 50 different health problems (heart, congenital diseases, you name it). The cost of keeping that child alive is monumental, exceeding even the most generous insurance benefits. The cost of keeping that child alive cripples not only the family but put a strain on the local doctors, etc. who effectively donate their time to treat her. What if the cost of keeping that child alive until she’s 25 will be astronomical, and that cost could immunize or treat hundreds or thousands of children who need it? What obligation does society have to help this child at the expense of others?
  3. Taxes on earned income in America (wages, etc.) are significantly higher for the middle class than for someone in the lower class (more than 40 percent of the US population pays no income taxes). Many people feel that is unfair (depending on your political and economic perspective). However, someone who lives off earnings from investments may pay 15% or less on their earnings, significantly less than a middle-class married couple who work as employees. Is it fair that employees - most of the middle class - pay a disproportionate share? And would it be fair to tax investors (“the rich”) more, but not tax the poor and middle class more?

Those are just a few examples of how a wealth-building society can be unfair. You have your own reactions to the scenarios above. Here are mine:

  1. I detest this attitude. His attitude will take money out of my pocket when he is older. But in western society, particularly in the US, the care and treatment of the elderly, the ill and those simply unfit to care for themselves are often left to the state. Should we have means testing for these people? “You didn’t get a decent job with good health insurance and keep your health up in your younger years, so to hell with you now that you’re old and have heart trouble? Live on the street because you didn’t save up.” As much as we might growl that in a moment of anger, I doubt anyone is prepared to see these people sleeping on the streets.
  2. I knew a child like this. She was a lovely, happy and intelligent child who suffered from an incurable genetic condition that meant her chances of living to be a teenager - much less an adult - were minimal. I knew her years and years ago and I have no idea what happened to her. The logical line to take would be to say “no, society has to follow the principles of the herd and Darwin and the devil take the hindmost” or “the needs of the many outweigh the needs of the few, or the one,” but unless you are a serial killer, devoid of emotion, it is impossible to meet children like her and not imagine society moving heaven and earth to care for her. Even if the chances of her living to be an adult are slim, she deserves her chance at whatever life she can have. My higher insurance premiums that may have resulted from that? Please.
  3. I am routinely infuriated by taxes. I am, however, not an adherent to the “no taxes” philosophy; a society that provides public services like police, postal services, libraries and a military has to raise revenues. They may not be spent wisely, but I can’t throw out the $800 screwdrivers with the public libraries - there will be good and bad. But I do realize that the unfairness in the system - the loopholes, the imbalance in taxation which favors investing income over wage income - may not benefit me now but it will when I am financially free. I plan to be one of the people living off my investments, earning no wage income and avoiding my fair share of taxes. So if I want to build wealth, why should I rail against this system? I intend for it to benefit me in the end. So I throw myself into battle against my 1040 again this year, struggling forward in anticipation of crossing the financial finish line. If I finish it - against the relatively daunting odds, considering I have no singing talent, ball-shooting ability or parents named Hilton - will I become a “raise my taxes to even things out activist”? Er, no.

Fairness is an overused (and misused) word. There is no fairness in a free, capitalist society, nor - when you stop to consider it - does anyone want complete fairness. Inequalities in the system are what allow wealth to be built, or care to be given to the exceptional, or even to allow for the occasional idiot. A fair society would not allow elderly poverty, but it would not allow for financial freedom, either - it would demand equality of outcomes. It would not have plastic surgery for starlets, but it would also not have medical treatment for children dying of expensive incurable diseases. A fair society would increase the burden of taxation on everyone without increasing benefits for the most needy. Human society being what it is, the concept of fairness will always remain just that - a concept. And maybe that’s not such a bad thing.

photo by Clearly Ambiguous

the two-income myth

My wife is an intelligent woman who decided to quit her professional career as a management-tracked analyst with a huge investment bank in order to be a stay-at-home parent when our son arrived, and to remain home even longer when our daughter arrived. I would have willingly stayed home in her place but being older and further along in my career I was making twice as much as she so it would not have made sense. She has now been at home for more than four years and I have noticed that there is a subtle campaign against her choice, and it makes me angry. Despite all of the talk about mothers making the ‘tough choice’ to go back to work, I think the tough choice is staying home.

First of all, before I’m jumped upon…I know there are single mothers and poorer families who have no choice. I would maintain this is a small proportion of the population, though. Single mothers definitely have no choice as the primary breadwinner, of course. Some families may have special circumstances that require both parents to work - health care costs spring to mind. I wonder, though, how many times the choice to work is the choice to support owning a second television, or keeping the premium movie channels, owning the house with the extra two rooms, or leasing a nice car - versus staying home with a child.

My family took a big hit to our finances when my wife quit work. We went from two people living in a two-bedroom apartment on two salaries to three people living in a three-bedroom house on one salary. We did it by making huge changes in our spending, and after a couple of years those changes have - surprise - become fairly routine. We understood that we could not afford as many luxury vacations or idle purchases of gadgets and jewelry and so on. The reward was that our children have been able to stay at home with their mother and be in a safe, healthy, fun environment.

This setup has not come without cost. My wife misses adult companionship and the sense of validation that you get from a professional position. We miss having the second salary, which for a while was all being plowed into savings and made for a relatively large down payment on our home. And of course my wife worries about her future job prospects once both of the kids are in school and don’t need a stay-at-home mom. But the worst thing in the past were the assaults on her decision by other women.

Bubelah relayed conversations to me from her friends and ex-colleagues and so on where the subject was inevitably “when are you going to get back to work?” Aside from the obvious insult that caring for a child is not “work”, this had a very negative effect on her state of mind. She usually laughed it off, but the simple fact is that she doesn’t really interact on a daily basis with anyone but me who supports her decision to make child care a full-time job - although since we’ve moved to Florida the support has been a bit warmer. We never felt that the trade-off of getting another salary was worth having our kids in day-care 10 hours a day before they were two years old, but that’s what we felt was expected, sometimes.

Do we need the money? We may not be able to spend freely like our friends do (particularly since we also don’t take on any debt) but we really don’t NEED any more money to meet our current expenses. I understand that sometimes both parents want to work. That is fine, but just be honest about that choice. Many people claim to be “forced” to work two jobs to make ends meet, but is it really “making ends meet” when you drive a new car and have premium movie channels and take a vacation to Aruba every year?

Assessing What is Important in Your Life

2547423465_f1db2aefc9

By Curmudgeon

You may have read on Steve’s blog a few weeks ago that I spent time in the hospital for a potentially life-threatening condition. It was my first time overnight stay in a hospital since I had my tonsils removed, almost forty years ago.

It was a seminal moment in my life; I had never had a health scare before, and as such things go, this one was fairly serious. Among the contributing factors where the stresses of my day job, which at extreme levels can produce damaging enzymes that wreak havoc with internal organs. My typical work week over the last two years lasted eighty hours, including weekends. I did too much, drank too much, and kept my stresses inside, until my body cried enough.

Steve has a wonderful post that first attracted me to his site – 8 Steps to a Six-Figure Career. Through my day jobs, freelancing, and independent consulting, I’ve made six figures since 1992. Last month, I suddenly came to the realization that a six-figure income was a poor goal to strive for if it were killing me to achieve it.

So I quit the day job, which was the source of 80 percent of my income. I am now entirely dependent upon independent project work for my income. I don’t know how I want to spend the next ten or fifteen years of my working life, but I do know that it’s not going to be as an office slave, working for The Man. My plan is to spend at least through the middle of next year working on discrete projects no more than forty hours a week, until I figure out what I want my future to look like.

In one way, it is easier for me than most people. I never got into the race to have the most toys (well, I did own a classic Corvette, years ago), and year after year saved around a third of my gross income. Money is not a problem, although I would prefer keeping the portfolio largely intact until later in life.

However, in other ways it is more difficult. Unlike Steve, I don’t have a discrete and definable set of skills in a single recognized field. Over the last 20 years, I’ve had a number of different jobs in several very different career fields. No recruiter would touch me for contract or permanent work.

Also, I am not a sales person. My social skills are probably below average, and while I have to spend a lot of my time interacting with others, it takes a bit of energy and focus on my part. Yet I have to market my difficult-to-define services, write proposals (I’d always undervalued my independent work when I didn’t have to make a living off it), and close deals.

Well, a month later, it seems to be working out just fine. It turns out that I know more people than I thought, and others are reaching out to me with offers of projects. I have several thousand dollars worth of short term projects over the next month, and later in January begin a medium term contract that by itself should make up for most of my forsaken income, while working far fewer hours.

Even though it puts me on the road for another possible six-figure income in 2010, it’s not a goal, or even a desire. In planning the tradeoffs of your life, don’t trade off your health for money. It’s a bad deal.

photo by Untitled blue

linklings, life is good but life is busy edition

Once again, I found it way too easy to fall behind schedule. Here are few links for reading – I have been swamped with negotiating multiple long-term contracts, setting up my own firm and dealing with an impending move (Saturday) and the omnipresent kiddies! Life is good, but life is busy.

what my grandparents taught me about money

old couple going for a stroll

Most of my relatives have divergent ideas about money and its place in our lives. By relatives I’m including the wide range from my wife to my parents to my in-laws, etc. I realized a long time ago that it is a trivial undertaking to pick out the flaws in other people’s philosophies or actions - while at the same time failing to recognize them in your own thoughts and actions. However, I still find it a fairly useful exercise to try and determine the how-and-why of people’s good decisions and bad decisions. Even more important is trying to understand the ‘why’ behind those decisions.

My mother’s parents (my grandparents), for instance, were always quite frugal. They were both raised on farms in the 20s and 30s and suffered through the Depression. My grandfather left home to join the Army pre-World War II, serving in the horse cavalry – and yes, it’s hard to believe the US still had a horse cavalry less than 80 years ago, isn’t it? Here are some of their views towards money that I think are interesting, both good and bad, and my take on them.

  • Investing, a good habit. My grandfather was an early fervent believer in investing. Coming from a rural background and suffering through the Great Depression you might expect him to be very wary of investing, but he was quite the opposite. He invested heavily in the market, and on a schoolteacher’s salary did quite well over the years. He invested in the market although he had a state pension, and could have chosen to spend that money on other things. From him I learned a very conservative study-buy-and-hold approach. Although I didn’t know it at the time I learned it from him, his approach was basically the same as Warren Buffet’s. While it didn’t make my grandfather a billionaire, it did make him a huge ‘extra’ retirement fund on top of his pension and my grandmother’s.
  • Never selling, ultimately a bad habit. My grandparents maintained an almost emotional attachment to some of their stocks and held them year after year, even in times of declining prices, shrinking dividends and their own advancing age and deteriorating health. They saved these stocks thinking that they would be passed on to future generations (for example, me). But as they moved into more and more expensive housing (nursing homes are much more expensive than regular apartments, obviously) until he passed away, it became obvious that all of that money would not outlive both of them. Had they moved it into a savings account paying 5% ten years ago they could have been earning steady income and perhaps avoided some of the market fluctuations that ate away at their net worth.
  • Never really spending, good and bad. Although they amassed a modest “fortune “, during retirement my grandparents never spent much. They constantly talked of wanting to pass it on to my mother (an only child) and my brother and myself. They never traveled, although my grandfather dreamed of returning to see a peaceful France and Germany, where he had spent years during the war. They did ‘live large’ in some senses - they ate out frequently (albeit modest restaurants), they bought new cars for cash every few years while they could still drive, and they were extremely generous to everyone in their family. They gave us stocks, cash and other gifts for years. However, it is hard for me to look back on their 20+ years of retirement together before my Grandfather passed away and think that they never really did much after retiring. I know that part of that is my perception, since I love overseas travel, but I am not sure retirement was meant for watching TV and eating out. That’s a judgment each person has to make individually, I guess. But to view it in a more positive light, when my mom was younger and living at home they were very frugal, and even late in life my grandfather’s frugality could be amazing. A heavy, heavy smoker for his entire adult life, he quit cold turkey one day because he thought cigarette prices had finally gotten too high - and didn’t ever smoke again (17+ years). He never worried about the health aspect as far as I know, but paying $3 for a pack of cigarettes instead of $2 was apparently one dollar too much.
  • Avoiding debt, extremely good. My parents and grandparents gave me one gift that I realize is invaluable after I read many personal finance blogs: the fear of debt. I have been convinced since an early age that going into debt is practically a mortal sin, a stain on your character, a flaw. While I think it may have been overstated a bit, this philosophy has made me somewhat unique in a sense: I have never carried a balance on a credit card, EVER. I have had only two debts in my life: a car loan one time and a mortgage on my current house. Other than that, I have never bought anything I couldn’t pay for with my existing funds. So debt has never been a headache for me, which is a great gift. Possibly the greatest one you can get, because with debt so little else is possible.
  • Charity begins at home, mixed. I know this may run counter to many people’s beliefs, but another closely held belief of my grandparents was to take care of themselves and their own before others. This philosophy meant that there was no ‘automatic giving’ to charity until everyone in the family was taken care of. They gave generously to their church every week, but I am sure (without ever having seen it put to the test) that had I been in need for some reason they would have given that money to me, instead, for as long as I needed it, and forgotten the church. Give when you are able. Get your own financial house in at least minimal order before trying to help others. I do not subscribe to the Christian teaching that I should give ALL I own to the poor, and apparently from the number of late model SUVs and families in nice clothes I see in church parking lots I’m not alone in rejecting that teaching. It doesn’t mean you can’t give to charity - I certainly give to several children’s charities - but take care of your family first.

Those points are really just highlights. The important lesson to remember is that anything your family or your friends teach you about finance is valuable. Sometimes you may learn by avoiding their mistakes, sometimes you may learn by taking their advice to heart - but it’s all learning. From my maternal grandparents, I learned to save and to avoid debt but also that sometimes you need to spend money, too, because there ARE things and experiences in life worth the money. The truly important thing was never the money, it was the security the money bought, and being able to give back to their family, that mattered to them.

(another reworking of an article originally appearing on brip blap in 2007)

photo by Ghostboy

expanding your means

“Most people would rather live within their means rather than expand their means.” – Robert Kiyosaki, Retire Young, Retire Rich

2111661914_047d8ca339

Most of us would rather be rich than poor. Rich may not mean monetarily rich – it may mean experiences, family, friends – but generally wealth enables the accomplishment of many other goals. How can you do it? You can save. You can invest wisely. You can reduce debt or decrease expenditures. The hardest way to get rich, but the only way that really works, is to expand your means. You have to earn more than you spend, consistently and constantly. You have to expand your means.

I get frustrated reading about achieving wealth by cutting out lattes. Sure, you can be better off if you don’t waste money on Wii’s and lattes. You’ll achieve your goals sooner if you invest in index funds instead of speculating on stocks. You’ll be richer, sooner, if you choose a good career that allows for upward mobility. You’ll win out – in today’s America – if you choose a public-sector job that guarantees benefits. Sad, but true.

But one thing that most people will never try is to increase their “means” past their primary income. It’s hard. I struggle to do it. If I asked you to generate, tomorrow, an extra $10 cash in hand, could you do it? Even if you make six figures a year, could you figure out a way to generate $10 above your normal daily haul? It would be difficult for most of us. Most of us would rather watch Lost than attempt it.

Expanding your means will make you wealthier than saving money. If you save $5, you’ve saved it once and you’re done. If you come up with a new business model that makes you an extra $5 today, and might – might! – make you an extra $5 tomorrow you’ve created a new income stream. Making a tiny bit more will change your life far more than saving a bit.

Kiyosaki’s phrase is telling. Most people would rather live within their means… and they’ll pay for it in the long run. Don’t kid yourself: it’s tough to live within your means. With the onslaught of advertising and “keeping up with the Joneses” it’s hard to resist the Wii’s and the Kindles and the latest fashions and the gourmet foods. If you can, kudos to you. I think I have so far, but it’s a constant struggle. But it’s akin to health: if you can avoid heroin, you’re in better shape than a junkie. It doesn’t mean you’ll live to 100. To do that you have to excel – you have to beat the norms, the average and the mean. Don’t think that skipping the morning latte is enough. You have to make that extra effort to create more wealth. Sitting back and “not buying” is not enough. You have to go out, and make more. You to create wealth, not just avoid spending.

photo by matze_ott
1 2 3 4 5 … 13