Portrait of a Day Trader

Of all the cast of characters on Wall Street, day traders are perhaps the least well understood. Most people understand the role of CEOs, financial planners and mutual fund managers, but fewer people understand day traders. Most media stories suggest that day trading is a fast track to bankruptcy, so the public is often left with a dim view of the strategy.

Properly speaking, day traders are individuals who buy and sell financial instruments within the same trading day. Of course, few trade exclusively on such a short term timeline, but the term is also often used more generally to refer to people who trade frequently with a short term time horizon. Many have lost gobs of money in short term trading, but others - notably William O'Neil of Investors Business Daily - have made large fortunes using this strategy.

Since we don't trade often we asked Jefferson Krull, a web publicist and active trader, to share his personal experiences with you. Jefferson was kind enough to complete a Q&A with the DINKs, which has just gone live. The interview reflects Jefferson's irreverent style but does give you one traders views on personal finance and offers some insight into how active traders conduct their business.

Click the gif below for the interview.






or go here.

Enjoy!

James

Slim Wallet

As frequent readers of our blog know, I'm all for the "less is more" way of being.

Generally I'm the total minimalist when it comes to the purse/wallet category. Recently I've experienced an uncomfortable bulking of the wallet.

Not only do I have to carry multiple currencies, often in small denominations, I also live where I am. Aside from my snits in Kabul, I'm often living out of my suitcase or hotel.

This means that I've been prone to also carrying multiple frequent flyer cards (as you never know which airline you might end up on). Then of course there are a couple of credit cards to use for personal, business, and emergency situations.

All of this adds up for a very bulky wallet.

As I prepared to go on the trip I'm on at the moment, in Saigon for a month, I decided that slimming down was necessary.

Not only was it necessary, it was also liberating. I've now written down all of the pertinent info for frequent flyer miles in my date book. Now this leaves my passport, driver's license, debit card, personal credit card, business credit card, insurance card, and United Gold Member (I just can't give up that one!)

While writing all of these down it still seems like a lot, I can't just go home for anything I've left.

Your personal situation may be different than mine, but I still believe that slimming down your wallet helps to simplify your life and your finances.

While you are at it, consider if there is anything that you have that could be canceled or is no longer in use. That helps even further.

Now that I've slimmed down my wallet I can highly recommend it. Even one or two cards less will make a difference!

Try it, you'll like it!

Miel

Karbo on Riches and Luck

"Never again will you look at a particularly successful person and sigh, 'How lucky he is.' Because you will know that 'luck' or 'fate' has absolutely nothing to do with success or failure. What we call 'luck' is, in fact, a direct result of the correct or incorrect application of natural laws anyone can use effectively if he knows how".

Joe Karbo
The Lazy Man's Way To Riches

The Drawbacks of Mutual Funds

Conventional wisdom holds that investors should avoid individual stocks and instead purchase mutual or index funds. While the reasons for owning mutual funds can be quite compelling, - greater diversification and improved return - investing in this type of asset present several disadvantages that most investors are not aware of, especially when compared to direct ownership of stocks.

Fees and Return:

A typical mutual fund can charge you upwards of two to three percent in management, distribution (12-b) and operating fees. In addition, many mutual funds also charge a sales fee or load. Even some no-load funds have sales fees or incentives for brokerage houses to push their fund, so even with so called "no load" funds there are implicit fee structures built into their prices.

Provided the funds management is good, fees are not necessarily a bad thing. However, it is important to recognize the impact that fees have on your profit. Lets say you invest $10,000 and it gives you a 9% return. At the end of 10 years you'd have $23,673.64. But, assuming you are charged a 2% annual fee, then you would only have $19,671.51 ten years later. Your 2% fee would have cost you a bit more than $4,000. Four grand is rather a lot to pay for management.

On the other hand, to purchase shares of stock, you'd pay roughly $0-100 per trade.

Unclear Valuation:

A second disadvantage to mutual funds is unclear valuation. The mathematics surrounding the calculation of pricing for mutual funds - known as Net Asset Value (NAV) is complicated. This suggests that a specialized set of knowledge is required to understand the value of your investment. This is a problem because when you purchase mutual funds you are essentially reliant on your funds management staff to determine the value of your investment. Valuation methods are less of a problem with exchange trades funds, and it is probably safe to assume that the mutual funds management is honest, but shouldn't you be able to easily determine how much your investment is actually worth?

On the other hand, if you own a stock, its value is easy to determine, just check the quote online.

Management Challenges:

Mutual funds managers vary in their quality. Some are good, some are bad, but most are just average. A bad manager can really ruin your investment. This is a lesson I learned the hard way. Back when I was starting to invest in 2000, I put a couple of grand into a Smith Barney Mutual fund. The fund lost promptly lost 20% of its value and Smith Barney was later sued for management improprieties related to their mutual funds.

Assuming however, that you manage to avoid a bad mutual fund manager, there are still significant challenges relating to management. First, it is very difficult for even good fund managers to consistently beat major stock market indexes. Second, many good money managers are no longer in retail mutual funds. Post 2003 there has been a "brain drain" from mutual into hedge funds. Hedge funds offer greater flexibility, higher profits and less regulation than mutual funds. Accordingly, many of the best financial minds left the retail mutual fund industry. On top of these challenges, you've got to pay the fees. So, why pay for what will probably be mediocre performance?

On the other hand, if you directly own stock you have can always improve the performance of your own manager - you!

Finally, we should disclose that we do invest in mutual funds. James has shares in the Vanguard S&P 500 index and Miel owns units in the ING Direct Real Estate Class O fund. So, while this asset class does have some drawbacks, we are both heavily invested in it.

Best,

James

P.s. Click here for the SEC's explanation of fund fees.

Preventing Family Conflict Over Inheritance

Hi All,

This was an article we did last year, but its good so I'm reposting it to give you all something to read. It is on the topic of preventing family conflict over inheritance.

Sometimes when a parent passes away, his children fight over the assets the parent has left behind. I have some personal experience with this. My grandparents lived in Davis, California and were both lifetime cigarette smokers. At the tail end of their golden years, my grandparents developed lung cancer and passed away after a long, lingering and ultimately unsuccessful battle with the disease.

My aunt, who lived across town from my grandparents, took responsibility for caring for then during their dying process. She paid their bills, managed their care givers, visited them and made sure their house was in good repair. When they finally passed on, my aunt made much of the funeral arrangements as well.

Being that she lived in the same town as my grandparents, by default she was responsible for taking care of their assets, including the house. Unfortunately, my aunt was cheated by the contractor who was hired to renovate the house for sale and ultimately she had to sue the contractor.

The lawsuit ignited a number of long simmering disagreements between my aunt, my mother and my uncle. Unhappy with how things were being handled by my aunt, my mother and uncle drove to Davis to "get things moving". This ment withdrawing the lawsuit, seizing control of the house and finally putting it on the market. This has complicated their already precarious relationship and now all three of them are hardly on speaking terms.

Now, what are the implications of this for personal finance? Generally speaking finance related conflict between siblings surrounding the death of parents is about much more than the actual money itself. It likely involves a complicated set of psychological factors related to history of the family. However, regardless of the deeper reasons for fighting, two things are clear.

1) An independent executor of the will should be established. This should be someone who is NOT a member of the family. Ideally a trusted attorney should fulfill this role.

Why someone independent? Because, the experience of death and disposing of assets leaves many with judgment subject to the whims of emotion. Also an independent executor can act as a scapegoat in case something goes amiss. For example, my family's case, an independent executor would have allowed my family to direct their disagreement toward someone other than each other.

2) A will should be established before the death of the parent. This should spell out precisely what the parent's wishes are prior to the parents death. The executor should merely execute the parent’s wishes as stated in the will.

Not effectively planning to manage inheritance disbursement simply leaves too much potential for trouble.

Best,

James

Pilzer on Wealth

"The incorrect supposition that we live in a world of scarce resources has done more than preclude the most individuals from achieving economic success. Over the centuries, this zero- sum-game view of the world has been responsible for wars, revolutions, political strategies, and human suffering of unfathomable proportions".

Paul Zane Pilzer
God Wants You To Be Rich

$800 Down the Drain...

As in all areas of life, financial lessons are often learned the hard way.

My most recent lesson was to keep your eye on the funds at all times and trust no one.

I'll spare you all of the boring details, but I basically got shamed out of $800 in my work's finance office. I counted out funds twice in front of one of the finance folks to return an advance. I then turned to deal with clearing another advance in local currency, with a second finance person.

The next thing I know, the first finance person counted out $800 less than I had just counted out in front of her. (It was a large sum, in case you are wondering how the count could be off by that much.)

I had been shammed. Right in front of me. In my own office.

After all of my travels and all the precautions I take to not get taken advantage of, I felt cheated.

In the end my office ruled that I should have had her do the cross check right away (even though she had been present through both counts). If it were a matter of a hundred dollars it wouldn't be that big of a deal and I would have just blamed it on myself. It's another thing when $800 disappears before your very eyes.

I believe this is by far the biggest money mistake I've made in the sense of being stolen from. I've had a camera taken in Peru and $20 souvenir in the form of a counterfeit bill, but never anything to this degree.

There goes $800.

I guess I can tell myself that I'm contributing to an Afghan family by having just doubled the finance person's salary. I can't say that I need it more than they do, but it would have felt better to have it happen voluntarily. I would feel very differently about giving that much rather than having it taken in such a way.

Unfortunately it is experiences like these that make us travelers a bit more guarded, and often jaded. I'm now in Vietnam, as I was headed to the airport when the incident happened, and find myself being much more conservative with my trust of others. While I know it is good to keep my guard up, I also prefer not to have an inherent lack of trust either. We are all just people in the end.

This brings to mind a lengthy discussion at a recent expat dinner party. The discussion basically debated whether it was better to trust cleaners, cooks, etc. Or whether it was better not to provide any temptation (i.e. don't leave a dollar on the table or money in your pockets going to the laundry). The debate was long and engaging where no one had a lack of an opinion or experience related to the situation.

I guess my lesson would have me fall on the side of not allowing for opportunities to be ripped off. Like James often says, crime happens only when the opportunity presents itself.

Lesson learned.

Miel

We Want Your Feedback

Hi All,

Just wanted to post this quickly. If there is anything you would like us to write about, or if there is something you think we should improve, please don't hesitate to let us know.

Our contact email is:

dinksfinanceblog@yahoo.com

Any feedback, good or bad, would be most appreciated.

Thanks,

James

How Rich Are You Really?

Americans are fascinated with wealth. We love TV shows like "Who wants to be a millionaire" or modern day Horatio Alger stories like Will Smith's portrayal of Chris Garner in "The Pursuit of Happiness". However, for people who are serious about measuring their wealth, its sometimes difficult to know precisely where you stand.

Since measuring your net worth is a very important part of personal finance, we wanted to let you know about a few links that can help compare your dollar worth to everyone else.

The best thing to do is compare your level of riches to scientifically valid measures of Americans overall population. There are two recent government reports that might be good for you to check out. These are from the Census Bureau and the Federal Reserve (here and here). Both of these are based on the most up to date social science techniques and therefore you can have some confidence their numbers are in fact true.

Survey reports aren't exactly a barrel of laughs, so here are some links that are both useful and fun. CNN money has a handy interactive net worth calculator. Also, the New York Times was running a great series of articles on inequality in America that lets you compare your level of wealth, education and profession against everyone else in the country (here). The issue with these sources is, *I think*, they use data from 2001. - Wealth distributions are constantly in flux, so I'm not sure how helpful values from 2001 are.

NetworthIQ, which is a delightful little website, has some statistics on networth. One thing to keep in mind about NetworthIQ is that the data there is self reported. So, you'll be measuring your wealth against that of people who like to post their net worth on the internet, not a scientifically representative sample like that in the Census and Federal reserve reports.

Happy comparing!

Best,

James

High Prices Hit Home

Hi All,

I just saw a great article on the AP wire. Evidently more Americans are selling their stuff on-line. Why? - The article says the main reason is that high gas and food prices are obliging more people to drum up extra money to make ends meet. The websites they are using are craigslist.com, ebay.com, Livedeal.com and auctionpal.com.

For what its worth, I'm feeling the pinch a bit also. The price of a pound of ground beef at Safeway today was $6.60. Last year it was about half of that. Yipes! Some of my DVDs may be going on the auction block soon as well!

Click here for the AP story.

Best,

James

Graph Your Net Worth

Hello All,

As you probably know, outlining your net worth can be an useful way of tracking your overall financial picture. A couple of years ago we decided to make a simple chart showing our overall level of net worth. It is shown here because it illustrates a couple of important points about personal finance. So, briefly:

1) Keeping Track Makes The Process Real: As you can tell from the chart below, our financial growth has been about $50,000 a year. While this is not a lot, it does indicate that saving and investing in real estate and stocks is an effective method of building wealth. This is important because it is quite one thing to read about money in a book and another to see it working in real life for you personally. Graphing makes the saving and investing processes real because you can see your wealth increase or decrease.

2) Keeping Track Helps To Determine What Works: You cannot tell from the graph below, but the DINKs bottom line growth has been due partly to stocks and good debt management. For example at the end of 2007, the graph was flat lining so we started putting money into income stocks and maxing out Miel's 401k. Interestingly enough, August of 06' was the time we realized our adjustable rate mortgages were impacting us. By adding up the new worth figures we knew that Washington Mutual's monthly $50-100 increase in ARM payments was eating our lunch. While these may seem like common sense, the processes of doing the net worth calculations greatly illustrated what was helping or hindering the wealth building processes.

Pump and Dump Stock Scams

Thank goodness for Kiplinger! This posting is a quick video from Kiplinger's personal finance on "Pump and Dump" stock schemes. The video is a brief but thorough explanation of how the stock scam works. It also provides a good discussion of the legality of the scam and how the scheme manifests itself today.

If you are into stocks but want to avoid getting ripped off, definitely watch the video.

For tips on avoiding pump and dump scams, surf on over to the SEC's webpage.

Best,

James

T. Harv Eker On Money

"Let me put it bluntly: anyone who says money isn't important doesn't have any! Rich people understand the importance of money and the place it has in our society...poor people validate their financial ineptitude by using irrelevant comparisons. They'll argue 'Well, money isn't as important as love'...What's more important, your arm or your leg? Maybe they're both important".

T. Harv Ecker
Secrets of the Millionaire Mind

May 2008 Net Worth

Hi All,

Well, we sat down and did our semi-regular update of our net worth. After we totaled up everything that we have and owe, our current net worth is $393,000, just south of 400k. This is a gain of approximately $30,000 since February or a 5% growth in our wealth overall.

A few comments. First, some of our assets are doing better than others. The overall gain is mostly driven by growth in our self managed stock accounts, by Miel's contributions to her retirement and by paying off our second mortgage. It was partially offset by our taking out an additional - and hopefully last - student loan of $8,500. Savings bonds and precious metals continue to be our portfolio losers.

Second, 393k is just a stones throw away from 400k. While 400k isn't as much as some people have, it is higher than the national average of people in our age bracket (299k) and its 10% of the way towards our net worth goal of $4 million. But more importantly it feels like we are nearing an important milestone and helps to affirm that all our planning and saving has been worthwhile.



Best,

James

You Know You Have A Debt Problem When...

Hello All,

I was just browsing through a summary of Jerrold Mudis' How to Get out of Debt and I came across a handy checklist of warning signs telling you when you have a problem. Many of these rung true for me back in 2002 when I racked up $11,000 due on credit cards. If you have a friend who has a debt problem, or maybe you are running into trouble, a 'yes' answer on some of these could help clarify things.

So, here is the list:

1) You are constantly juggling payments
2) You miss payment-due demands
3) Mail remains unopened because you don't don't want to deal
4) You can't make more than the minimum payments on your debt
5) When buying things on credit, you choose the longest payback terms possible
6) You're psyched when the card company increases your limit
7) Budgeting isn't something you do often
8) You have little or no savings or investments
9) When making payments, you used to use cash, but now use store credit cards.

Back in 02' when I was racking up my debt, I could have said yes to most of those. So, from my standpoint they are pretty valid problem indicators.

The list is from Tom Butler-Bowdin's 50 Prosperity Classics, an excellent collection of summaries of influential books on building wealth.

Best,

James

Real Estate And Our Long Distance Marriage

One thing about our long distance marriage is that it has changed both of our lifestyles drastically. My wife Miel now lives in a group house in Afghanistan, and I am leading a student lifestyle in College Park, Maryland.

When we were living together in Washington DC, we bought a one bedroom condo. At the time it was appropriate for us as a married couple, but now just one of us is in Washington. While the apartment is wonderful and is located in an exciting neighborhood, we are spending approximately $1,900 a month to maintain it. The condo fee is $200 and the mortgage is $1,700. Nineteen hundred is a lot to pay to house just one person.

Since $1,900 is a big chunk of our budget, we've been considering renting the place out and downsizing my accommodations. The main idea would be to use the rental income to buy modest properties in Oregon and in Maryland that will facilitate our long term goals.

Since our long term goal is to move back to Oregon to start a family, real estate would anchor us to the Pacific northwest. We have been looking at empty lots in good neighborhoods in Portland, OR where we could build a house when its time to go back to Oregon. We are also thinking about getting a 2 bedroom condo around the University of Maryland. Preferably someplace I could share with other students to supplement our income. So far, our back of the envelope calculation is that we could carry mortgages on these two additional properties for what the rental income on our apartment in DC would cover.

The only reservation I have at this point is psychological. Our DC condo has always been "our place". We saved for it, picked it out and furnished it together. It is symbolic of our relationship together in Washington. Leasing the property would be therefore be symbolically letting go of that aspect of our marriage. Naturally, neither of us want to do that, so we are reluctant to rent the condo without an appropriate symbolic substitute.

Best,

James

Saudi Arabia in 'Golden Era"

Folks, Bloomberg is reporting that Saudi Arabia is a golden era. My wife Miel travels through the gulf all the time and she can attest that things are happening over there. Feel free to surf on over to Bloomberg and check it out.

Best,

James

Q & A with Chuck Carlson: Friend to the Small Investor

This posting is a question and answer session with Charles B. Carlson. Mr. Carlson is a prolific author and nationally recognized expert on dividend reinvestment plans. Carlson is a chartered Financial Analyst and holds a MBA in business from the University of Chicago. His commentary has appeared in publications such as Barrons, Forbes, Business Week and Kiplinger's Personal Finance. Mr. Carlson has also appeared in numerous radio and television programs including CNBC and CNN.

We reached Chuck via email this afternoon.

1. Can you please tell us a bit about yourself? About Horizon Investment? How long have you been in business? Who are your clients?

I have worked at Horizon for 26 years. I’m a rarity in that it is the only place I have worked since graduating from Northwestern University in 1982 with a degree in Journalism. I also have an MBA from University of Chicago and am a Chartered Financial Analyst (CFA). I have written eight books. Our company does two things – we publish investment newsletters via Horizon Publishing; and we manage money via Horizon Investment Services. We currently manage about $170 million in separately managed accounts and consult on an additional $800 million in institutional assets. Our clients are typically affluent individuals, including retirees, professionals, and business owners. Horizon Publishing has been publishing investment newsletters since 1946. Horizon Investment Services has been in business since 1998.

2. What are the ways you find most of Horizons clients have been successful in building wealth?

Simply put, our clients have saved and invested. It’s really quite simple – save and invest. When you save, you not only save today’s dollars, but tomorrow’s dollars. Indeed, spending begets spending. When you buy stuff, you usually need to spend to support the stuff you buy. Thus, spending is a negative multiplier. Wealthy people save and then invest in the stock market.

3. Given current market conditions how would you recommend adjusting one's portfolio? How are your clients reacting to changing economic circumstances?

We think this is a bull market (the primary trend just changed to a bull market), so we are recommending a pretty high exposure to stocks – perhaps 85%, with 15% in cash. I think people need to use the current turbulence to upgrade portfolios so they are positioned to benefit when the next up leg occurs.

4. Horizon's website mentioned that your business model involves the Dow Theory forecasts. For those who don't have much investing experience, can you share Horizon’s investing philosophy and the rationale behind it with our readers?

The Dow Theory, developed by Charles Dow in the 1890s (Dow was the first publisher of The Wall Street Journal), looks at the performance of the Dow Jones Industrial and Transportation Averages. In a nutshell, when these two averages are moving in sync to higher highs, the primary trend is bullish. When they are moving in tandem to lower lows, the primary trend is bearish. We incorporate the Dow Theory into our asset allocation model. For individual stock selection, we rely heavily on our Quadrix stock-rating system. Quadrix looks at more than 5,000 stocks. Each stock is ranked on more than 100 different metrics. Thus, Quadrix provides a disciplined, consistent approach to evaluating stocks.

5. From what I gather, Horizon works with affluent families to meet their financial goals. Do you find that married couples have a different dynamic when it comes to making and managing money compared to single people? How do you think that marriage changes how people deal with money?

We really don’t have that many single clients. I do believe married couples generally work as a team. However, this is not always the case, especially if this is the second or third marriage. In those instances, it is not unusual for married couples to look at their assets individually – what is mine is not necessarily his, and vice versa.

6. You are also known as an advocate for dividend reinvestment programs (DRIPS). Can you please explain what DRIPs are and their advantages for the beginning investor?

DRIPs are programs that allow investors to buy stock directly from companies. They buy stock by having dividends reinvested and by making additional investments. The appeal of DRIPs is that you don’t need a lot of money to start – oftentimes as little as $50 or $100. Also, DRIPs, for the most part, are very fee friendly. Also, many plans allow investors to buy their first share and every share directly from the company. Finally, more than 1000 companies offer them, including many quality blue chips. This is self-serving, but our newsletter, DRIP Investor, provides an excellent tool for learning about DRIPs. You can get a free copy of DRIP Investor by calling (800) 233-5922 or visiting our Web site at www.dripinvestor.com.

You can learn more about Chuck Carlson's books here.

To reach Carlson's Horizon Investments go here.

To check out Chuck's writing at Forbes, click this link.

Saving Money While Eating at Work

Hello All,

To get Wednesday started off, we wanted to share some tips on saving money while you're in the office.

1) If it's available, drink work coffee. Office coffee is often free, Starbucks can cost more than 4 bucks. If you are lucky your work even has Starbucks coffee (though it is never as good without the barista!).

2) When you can't score free work beverages, bring your coffee from home in a thermos. Or bring some tea bags and score some hot water.

3) If you are hungry for a snack, consider drinking a glass of water first. That should cut down on your appetite.

4) When cooking at home, make a lot of food and eat the leftovers for lunch.

5) If you gotta eat out for lunch, try looking online for coupons to local restaurants. Or better yet, consider ordering vegetarian. Dishes without meat are usually less expensive.

6) Score free office leftovers. If you happen to be at a large office you might want to hold out until the lunch meetings are out and then wait for it to finish up and hover over your email for the free lunch posting. (sometimes there is such a thing as a free lunch, even if that means being a corporate slave).

7) Lastly, step away from the vending machine! If you are a sugar addict (like most Americans) then switch to having some hard candy squirreled away (not in plain sight) so that you'll consume less of it and it will be a whole lot cheaper than a daily snickers. Your waste line will thank you as well!

Scrimping can be a bother, but you'll eventually be rewarded with a fatter bank account!

Best,

James

Book Review: A Million Bucks by 30

This posting is a review of Alan Coreys A Million Bucks by 30. The book is the story of how reality tv sensation Alan Corey went from being nearly broke to being a millionaire by the age of 28. The book is partly a guide on investing, partly an entertaining story.

There are a couple of things about Corey's book that make it stand out from the usual crop of personal finance paperbacks.

1) It's a fun easy read. The paperback has about 220 pages, but you'll be able to breeze through it an couple of hours. Corey has an accessible writing style that draws you into his stories and keeps you hooked.

2) It's full of great tips. For example, in every chapter, the book has a set of ideas for being a cheapskate. For example Corey says you should bring one of your old popcorn bags and get free refills at the theater. - But he used the same popcorn bag for three months. He also bought one pair of shoes, and only one pair of shoes - a year. If you are interested in being frugal, Corey's book has plenty to keep you occupied.

All in all, Alan's story is a lovely entertaining romp, however you might consider taking it a grain of salt. On occasion, the author seems a bit willing to bend the rules. For example, Corey admits he made up letterhead for a fake magazine in order to score an interview with an indy band he liked. That said, his description of the hard work and hustle it takes to succeed in real state seems to reflect the efforts of a guy who made money the hard way. so, the book rings authentic even if the author strains some ethical boundaries.

Corey's story is currently selling for 12 bucks on Amazon. Pick up a copy, it will be 12 dollars well spent.

Best,

James

How Much Should You Budget?

My wife's sister messaged her on Skype the other day. She was curious as to about how much she should be spending on common household expenses. Well, we were curious also and decided to hit the books to see what good rules of thumb are.

According to the Motley Fool, you might consider the following very rough guidelines:

Housing and utilities, 25-30%
Food, 10-15%
Vehicles, 10-15%
Insurance, 5%
Saving and investing, 10-15%
Entertainment, 5%
Clothing, 5%
Medical, 5%
Childcare and education, 1-8%
Gifts and charity: Up to you!

Of course, where you live is a major factor in how little you pay for each category. For example the DC area, housing is very expensive. In a rural part of the country like Oregon rent and mortgage prices are more manageable.

Spend it?

Listening to the news this morning on my way back from Dubai to Kabul I couldn't help but ponder the question these days of what to spend the tax "rebate" on.

First, I want to say that I think it is incredulous that the US Government has the gull to call it a "rebate" when it is merely an advance on future taxes you will have to pay back without noticing the pay back. In my mind, a rebate is something that you get and keep. If rebates from stores worked the same as our government we'd have to pay back the rebate over time. So in my mind, it is all a big scam on the American people to try to get them to spend even more than their rebate.

We won't be getting ours for some time, since we have to wait until September to file as an expat, but I do wonder about to spend or not to spend.

Part of me is annoyed with the whole thing and wouldn't spend it the principle that I don't think consumerism is the answer to our economic strife. At the same time, it's not like I want the economy to decline either.

I'd love to hear what our readers have to say on the subject. Do you plan on spending it? Or saving it?

Cheers,

Miel