All Things Money – Roundup

Some interesting things this week:

Budgets are Sexy has another installment of “Would you rather”. This time on the interesting topic of fame vs. fortune.

This has to be the coolest idea I have seen in awhile from the PF blogosphere. I have an idea for a documentary I have been kicking around for awhile as w I look forward to this one!

Wise Bread on How not to be a wage slave, how to git-r-done on an airplane and college fund tips. All great articles (as usual)

Get Rich Slowly has an interesting reader story about the relationship between nosy family members and personal finance

Financial Samurai has an article on How To Always Feel At Home While On Vacation

Don’t Do This!!! (but if you have to read this article first) How to borrow from your 401(k)

 

Be Well

-WR

The Hero’s Journey to Financial Independence [Kindle Edition] is free for 24 hours

If you own a Kindle (and even if you don’t) don’t hesitate to grab a free copy of the new book The Hero’s Journey to Financial Independence:

Free for 24 hours!

 

This small book offers a unique approach to the subject of personal finance. The Hero's Journey to Financial Independence takes the reader through the steps necessary to develop strong, enduring money habits and to avoid the pitfalls many of us face. My intention was to create a fun, easy to read volume full of rock-solid financial wisdom and real-world advice. It is based in part on Joseph Campbell's monomyth as described in his book The Hero with a Thousand Faces.

The hero’s journey has been an inspiration to writers for over half a century. The Matrix, Lion King and Harry Potter all use a form of this framework. Most notably, it inspired George Lucas to envision Star Wars as a mythological hero tale.

 

-WR

 

 

 

 

 

Personal Finance Roundup

Here are some interesting tidbits from around the web-o-sphere. Regardless of your political persuasion, this is a powerful video:

And here are a few excellent personal finance posts:

The Simple Dollar has Ten Pieces of Inspiration

Money Saving Mom shows us how to Tweet and get 5 bucks worth of Amazon Video

What Can Harry Potter teach us about personal finance? Wise Bread has the scoop.

Personal Finance Snapshot

Some interesting things going on in the world. Gotta keep your eyes open or you might miss them. Here are a few of the more interesting tidbits:

 

1. Why is this even legal? O.K. Not PF but damn! How can that be kosher?

2. Does it hurt when you hit the debt ceiling? Why yes. Yes it does.

3. I have a BIG pile waiting for a place to call home.

4. Don’t think you qualify to refinance? Think again.

 

Let me know what you think.

-WR

Worthwild Financial Snapshot: Cinco de Mayo Edition

Happy Cinco de Mayo!

First, Let me dazzle you with my Margarita Recipe:

2 Ounces of  freshly Squeezed lime juice (Pulpy is good)
1 oz triple sec
2 oz tequila ( Get a bottle of Dos Gusanos, or Two Worm Tequila and share with a friend)

Ice, Kosher salt and a few wide rimmed glasses.

Ok, Now that’s better. Let’s do a Worthwild Roundup. Here are a few stories and articles I found worthwild this week:

1. SCORE blog: Successful Entrepreneurs Share Stories.

My favorite line: Self-employed individuals have a certain entrepreneurial spirit that’s hard to describe. But, you can see it in his or her facial expressions and hear it in their voices. Once you catch the bug, it is hard to think of anything other than launching your business. How true

2. Budgets Are Sexy: Help a Reader- pay off student loans or start saving

My Advice?: Get moving on building an (at least) 6 month contingency fund. This is not a matter of current need, local situation or any other fleeting reason. It is a matter of philosophy. Building and maintaining a contingency fund forces you to make tough value choices and build enormously powerful lifelong habits. You’ll realize that having this critical safety net allows you to make better choices about almost everything else in your financial life. Try to refinance your student loans to lower rates + longer term. One thing different about student loan debt than most other forms is that *hopefully* your earning power will climb over time.

3. Consumerist: I am so glad to see an American company be so profitable, Wait! What? http://con.st/10018507

4. Deal Seeking Mom: Lots of coupons going on!

5. Get Rich Slowly: Pack Smart To Save Money

Great article. My personal tips are to pack sandwiches, water and a bag of veggies for long road trips and picnic instead of restaurant. You get on the road quicker and can spend the time walking and stretching your legs (instead of sitting in a booth at a Shoneys). You save a ton of cash, too!

 

I posited my opinion on who should get the Bin Laden bounty

 

Let me know what you think.

The Wisdom of Warren Buffet

Warren Buffet is amazing. He is one part folksy, one part frugal and all parts genius. Anyone interested in achieving financial independence would benefit from his sage advice. Anyone interested in investing their lot successfully would benefit from reading a book he considers to be the best treatise on investing ever written The Intelligent Investor

Anyone who would like an annual insight into his methods, successes and failures would do very well by reading his annual letter to the stockholders of his company, Berkshire Hathaway.

I never, ever read stuff like this. Annual report to shareholders? ugh. Like reading the instruction manual for a microwave. (Why do they even have these. Should say, “If you do not know how to use a microwave, please return it to the store or ask someone to help you”.)

This one is different. Buffet’s annual letter to shareholder’s is the investment world’s Steve Jobs Keynote. Instead of dropping the cloth from this years i-Thingy, It is a look into the thoughts and philosophy of the worlds greatest investor. It is an anomaly. A shareholder letter should not be easy to read and funny. These literary vessels are supposed to obfuscate performance and hide the CEO’s mistakes, right? Instead, Buffet’s letter is clever, open and even whimsical. Full of interesting ideas and quotes with impact.

In his discussion of  Clayton Homes, Builder of manufactured homes (Trailers), Buffet discusses the plight of the American homes industry. In just a few paragraphs he sums up the conundrum. While Fannie, Freddie and the morally bankrupt mortgage industry were populating their stick-built homes with warm bodies (only to dice up the loans and resell them as commodities) , Clayton was in the unenviable position of selling and mortgaging small affordable dwellings without the help of the big government backed organizations. Why bother helping a working class family into a starter home they could readily afford when we could lure them into a McMansion and profit twice! First when the loan is sold and again when the home is eventually seized. The collusion and corruption we saw in the entire real estate sector (including the U.S. government involvement) is legendary. We will be reading about this era as a warning for a long time to come.

Buffet offers an unorthodox and outstanding solution:

“Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

Well said. My wife and I started off in a starter home, not a manufactured one but a structure 75 years old and small enough to be called a shed if looked at with squinted eyes. This was during the boom times and every lender I spoke to ridiculed me for not leveraging more. We bought that home (still own it as a rental) for a little over what I earned in 1 year. I used an online calculator that told me a conservative choice would be in the 400-420k range. I knew that was crazy. We found a home for 100k, drove used cars and worked hard to make it just right and never looked back. I am not suggesting that I made no mistakes (ask me about my WorldCom investments) but I do assert that your big choices need to be made using your own wisdom, intuition and clarity. A Bank and a Real Estate Agent will not have your best interest in mind when telling you what you can afford.

He is just as wise in summing up the subsequent credit crunch:

“Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed.”

We should all have cash in our portfolio. This is not just a contingency fund that waits for us to make mistakes, it also awaits our moment to seize a unique opportunity. To Zig when everyone else is screaming “ZAG!”.

“By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well.”

In short, Buffet runs his enterprise just as one should run his or her home and life. Keep an eye on value, be frugal, be optimistic in spite of the naysayers around you.

Here is the link to the letter: http://www.berkshirehathaway.com/letters/2010ltr.pdf

Let me know what you think.

-WR

The Cult of frugality: Part II

Frugality is no longer a fad. (That ship has sailed)

Fads of yesterday

Fads come and go

The most recent wave of the fad of frugality is on it’s way out. This fad comes upon us when jobs are scarce and people are scared. Now that things are looking a bit rosier I urge you not to let it go. Donate your Crocs, Uggs and lowrider jeans but hang on to your frugality.
The Dow Jones Industrial Average  is hovering above 12,000. Consumer spending is up. Credit card interest rates are up as well according to this CNN Money article. It seems that the credit card reforms left out the most obvious culprit in the ‘debt is the slavery of the free‘ equation: Interest Rates.
One of my favorite radio programs is APM Marketplace. Kai Ryssdal, besides having a pretty cool name, puts on an amazingly informative and entertaining half hour money talk. Today the Marketplace team reported that credit card use has risen while savings rates have dropped. Hmmm. I remember wondering last march how many people would retain their frugal mindset. What do these numbers seem to tell us? It is too early to tell but I think most of us have or will soon revert to previous habits of spending. If your pre-meltdown habits were frugal, great. If you, like millions of others, got caught up in the spend-for-all then you should probably hide your plastic right about now. Couple the past few years of recession fatigue with good news of the economy and an early spring and you could be in for some difficult consumer temptations.

Spring is near!

Now, it is true that we need consumers (you and me) to go out and spend. Buying stuff is the engine of capitalism. Just make sure that you are building your contingency fund and investing in your long term wealth first. There is no benefit to our society when unhinged spending leads to a personal financial disaster. One of my all time favorite quotes is from public speaker and author Jim Rohn:
“I will take care of me for you, if you will take care of you for me. ”
- Jim Rohn
It is important to understand that while it may seem like there is a direct cause-and-effect relationship between one and the other, The Stock Market is not The Economy. Experts use the economic indicators and stock indices to predict the future but are often wrong in their prognostication. The only relatively sure path to financial independence is to practice the fundamentals:
1. Give your money or  time to a worthy cause (here’s a good one: Lovedrop)
2. Be frugal
3. Build a contingency fund
4. Park your money in well-balanced investment vehicles
5. Strive to find your bliss and follow it

If you will do these things for me, I will do the same for you.

-WR

btw- I have a ton of Silly Bands, real cheap, if anyone is interested…

Auld Lang Syne and A Financially Independent New Year!

Happy New Year!

This day tends to force us to reflect on the past and as a result, there is no shortage of top ten lists out there. We have instant access to the top 10 movies, games, news items, victories, blunders,the sexiest, the ugliest, the best dressed, etc…

I wanted to take a different tack and focus much more on the coming year. In that vein I have chosen one area of reflection and several more items to help plan for an amazing 2011. I hope you find these ideas useful.

The Past:

Consumerist has a tidy list of their most read stories of 2010. Since I got a Best Buy gift card for xmas, this article popped out as one of my favorites. They are all good as there are few things more satisfying than hearing about a little guy beating a corporate Goliath. As their tag-line reads: shoppers bite back.

OK, enough about the past…

The Future:

J.Money at Budgets are Sexy posted a great looking forward article.

Entrepreneurship:

Is this the year you are going to get that business started?

Now would be a great time to visit SCORE.

What is SCORE you ask?

SCORE, Counselors to America’s small business, is a nonprofit association dedicated to educating entrepreneurs and helping small business start, grow and succeed nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA).

As I mentioned in The Hero with a Million Dollars, SCORE is all about finding a mentor to help you with your business.

Should you incorporate? Form a multi-member LLC? Go in as a Sole Proprietor? Should I set up in my home state or in Nevada? Delaware?

These are questions every potential entrepreneur faces from day one.I have 2 things that helped me and could serve as the launching point for your great idea:

1. Get a copy of Limited Liability Companies for Dummies by Jennifer Reuting and (after you read it) head over to her site: MyLLC to set yours up.

2. Don’t be afraid to Ask the Business Lawyer about specific issues related to your chosen endeavor. Nina Kaufman has tons of excellent articles, a free E-zine and if you are considering a partnership of any kind, you absolutely need to check out The Entrepreneurs Prenup.

Investing:

1. Open an account with Vanguard (Disclaimer: I have zero affiliation with Vanguard other than some excellent investments). They have the best low fee mutual funds in the industry. Whether you are starting a Traditional IRA, Roth IRA or a Tax advantaged Bond fund, you should be working with Vanguard. Do you want to learn about ETF’s? Check this out. It is the single best overview of ETF’s I could find anywhere.

2. Do you already have an IRA? Don’t worry, you still have until April 15th, 2011 to max out your 2010 contributions. Nice!

3. Pick up a copy of The Richest Man in Babylon and check out my review of The Elements of Investing. Both of these small, easy to read books should be on your bookshelf.

Taxes:

1. Get a copy of Sandy Botkin’s Lower Your Taxes: Big Time. It is an eye opener and will pay for itself in the first chapter.

Frugality:

1. Check out inexspensively.com and clean out your cupboards already!

Giving Back:

I believe giving should start at home, in your neighborhood and in your community. Give to your church, your school, your firehouse. Buy local when possible and help employ one of your neighbors. The following organizations are amazing in their creativity and cause. Give till it hurts then give some more, you will never regret it! Here are my favorite charitable groups:

1. There is nothing quite like Operation Homefront. Helping out those who bravely and tirelessly defend our freedoms is possibly the best kind of giving back.

2. The Giving Effect:

from The Giving Effect’s about page: Most of us have lives filled with things we don’t use — shoes, food, clothes, computers, and more. At the same time, thousands of non-profits and civic-minded people are struggling to get basic items to people in their communities. We see an opportunity to connect these groups together.

What a great concept!!!

3. LoveDrop:

You’ve heard of micro-transactions right? Small amounts of money from a large enough pool of people can add up to some huge results. Well, Love Drop is a micro-charity concept. With as little as $1 a month, you assist the love drop team in helping one person or family a month.

-WR

Please Comment

A Picture Is Worth A Million Dollars

I thought it would be fun to create a flowchart based on the stuff I put in The Hero with a Million Dollars. They say a picture is worth a thousand words, I think my picture is worth maybe 2-300 words. More importantly for me though, It has been worth many thousands of dollars.

Before we look at the chart, there are a few questions that come up right away when you look at this process:

Q. If I give 10% to charity, pay 10% to debt elimination and fund my 6-month contingency fund with 10% that leaves only 70% to live on.

A. Was that a question?

Q. How can I be expected to live on 70% of my meager salary?

A. It ain’t easy but it can be fun if you look at it the right way. Living frugally and trading down to wealth help us create rituals that serve us. The rewards are delayed somewhat but once the habit is set we swiftly forget about the downside.

Q. No. You don’t get it. I have a mortgage, car payment, student loans, credit card payments…did I mention my mortgage?

A. I get it. I’ve been there. Trading down to wealth takes some time but you can start where you are. You can start to look for a reliable, pre-owned car that makes sense for you. You can start to look at a living arrangement that encourages frugality. This could be buying a smaller house in a nice neighborhood. It could be renting a less costly room or apartment. How many new things do you own that could have been purchased pre-owned for a fraction of the cost?

It is the habit that counts most. You must develop positive money habits. The percentages can be adjusted at first while you are starting out. Try 5% – 5% – 5% [Charity- Debt Elimination - Contingency ]

Q. Can I just skip the charity stuff? I need charity more than I need to give charity.

A. Nope. Lots of reasons but I like this one best: Helping others is a fundamental human need. You send yourself a powerful message when you contribute to the health, happiness, growth or well-being of another. Most of us will work harder, longer and strive to be more effective when we know that others will benefit from our toil. Trust me on this one. It is vital. Also, helping others is being a good human. You want to be a good human, right?

If you can’t feed a hundred people, then feed just one.

-Mother Teresa

Q. What is Asset Allocation? What do I invest in?

A. Asset Allocation in this example is simply the percentage of stock index funds vs. bond index funds. When you are young – (20s & 30s) 70-100% of your investments should be stock-based. As you age, bond funds should start to garner a heftier slice of the pie.

As for what to invest in, I encourage you to read The Elements of Investing by Burton G. Malkiel and Charles D. Ellis. I wrote a short review awhile ago.

I have invested with T. Rowe Price for a long time and while some of their expense ratios are a bit higher than Vanguard and Fidelity, I especially like their Automatic Asset Builder program that allows you to start building a world-class investment portfolio for as little as $50.00 per month. Set it and forget it! Whichever investment house you choose, you can’t go wrong.

Q. I have a secure job, do I need a contingency fund?

A. Yes. See my article Contingency Theories for more info on this important but sometimes overlooked  topic.

This hypothetical Q&A could have happened but did not. I made it up. If you have real Questions, let me know.

Some of you have commented that this site has been quiet for a little while. While I have been working on several projects and closing a few deals, I am eager to provide more regular updates. There are also 2 things I want to mention:

Trent Hamm’s book “The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreamsis a good read, especially if you are young and struggling with your finances. His blog, The Simple Dollar, is a favorite of mine.

My friend (If he will let me call him that) J. Money over at Budgets are Sexy has one of the most open and refreshing sites on personal finance I have seen. There are so many “Do what I say not what I do” blogs out there it is nice to find one that is at once authentic and interesting. I find myself rooting for him and hoping his investments go well. Worth a look!


Here’s the flowchart. Tell me what you think…

How to become wealthy

How to become wealthy