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Monthly Archives: January 2008

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Focus, don’t Diversify

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Hi All,

Most of you probably know what diversification is, thats when you spread your investments across various asset classes, across various industries and types of stocks. The main idea behind diversification is that large scale statistical processes allow you to efficiently maximize your return while limiting your risk (1).

Ignore diversification. Its great if you want to buy mutual funds and let them ride, but it makes less sense if you’re serious about building wealth. If you don’t believe me, take from Warren Buffet

“Diversification is protection against ignorance. It makes very little sense for those who know what they’re doing“.

– Buffet quoted in “The Warren Buffet Way”.

Instead, I would reccomend getting informed, taking calculated risks and focusing your wealth building activities. Most people who are serious about money do this.

Best,

James

Merits of Hotel Points

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I’d argue that if you travel often, for work or pleasure, it pays to find a hotel chain you like and stay there whenever possible. Even if you don’t travel often that it is likely to get you some freebies eventually.

Here are some of the perks you should consider:

  • Earn points just for staying; extra points for meals and so forth.
  • Meet your expectations – this helps especially when traveling often. It is nice to know what you’ll find wherever you are in the world.
  • Get bonus points for using a credit card associated with the rewards program.
  • If you are a frequent traveler you can expect better treatment and perks as you move along. Reaching gold status on United recently showed me how nice this can be.
  • Get bonus points through partner programs and so forth.

Some rewards deals you might want to look into are:
Marriott Rewards
Hilton Honors
Starwood Preferred Guest (Sheraton)
Priority Club (Holiday Inns)

Most have visa programs that also provide up to triple the points for use at the hotel and the points themselves tend to go further, dollar for dollar, than miles do. In my view it is still important to rack up points where it will get the most savings. For instance, in the past I’ve stuck with the mileage for free flights, since I’d rather get something free that I would already be paying for. Now that we have so many night for R&Rs it might be worth it to get more hotel points for free nights.

With all of my travels these days I’m having to remember room numbers like pin numbers and have to remind myself just where I am at. Despite the similarity between hotels it is comforting to see how each country makes them a bit different.

Safe Travels!

Miel

Best EBooks in Personal Finance

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Hi All,

It’s a bit of fast moving day here with the DINKs, so I wanted to make you aware of a great posting over at the Consumerist. They’ve done the hard work and assembled a list of the best 30 free personal finance ebooks.

Check it out. – Perhaps they have resources that might help address your personal finance questions.

Best,

James

How We Are Paying Off Debt

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Hi All,

So now that my exams are over, I find I’m focusing more on our financial goals. The main goal that we DINKs are working on is paying off our second mortgage. Its currently at $17,329.48 and we’re hoping to have it paid off by this September. It might be challenging to get there, but we’re optimistic.

Consider this, when you pay off debt, its the rough equivalent of investing your money. – You become richer because you have fewer liabilities. So for example, if you have a credit card at 20%, paying it off is the rough equivalent of getting a 20% return on your investment. In our case we owe 9% on our second mortgage. This suggests that when we pay off the loan, we get a return of 9%, so its a good deal.

In case you don’t see how we can dump 17 grand in 9 months, here is a sense of where the cash is coming from:

1) Miel’s Salary – $1,000 /month
2) Our Investment property – $50/month
3) Transfer from Prosper.com – $50/month
4) Stock Dividends – $513 /month
5) Blog income – $10 /month
6) 1 time payment of $1,000 from legal settlement

This suggests that on a monthly basis we’ll be able to raise $1,623. Which is a bit less than what we’ll need to eliminate the debt.

Now, whats the takeway for you? Here are some points to consider:

1) Consider shifting your income streams around. If you have income from a side business, consider focusing in on paying off your debt or acheiving other goals.

2) Work together. You are far more likely to achieve your goals if you work cooperatively with your spouse or partner. Two people working together can achieve much more than one person working alone.

3) Apply windfalls. Supposedly congress is planning an incentive package which might put several hundred dollars in the pockets of taxpayers. Consider putting these types of windfalls towards your goals instead of spending them on luxuries.

Hope some of this help! Good luck with your goals!

Best,

James

Back from the Ivory Tower

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Hello All,

One thing you learn about being a graduate student is that the isolated culture of academia is alive and well in America’s universities. After several weeks of study, I took my first set of comprehensive examinations a day ago. The results aren’t in yet, but comprehensive exams are a rite of passage that graduate students have to go through – a bit like a Bar Mitzvah for Jewish people or a tribal initiation rite for African bushmen – so I’m glad to have them behind me.

At any rate, while my nose has been stuck in a book, the real world has been moving fitfully onward.

The recession bells are ringing: The major US domestic stock market indicator, the Standard & Poors 500, has taken a hard beating with the ugly stick. Similarly, the down jones industrial average has been in decline. The NY times is reporting that major retailers are emphasizing low prices in their advertising and the federal reserve recently cut interest rates by .75 basis points to stimulate economic growth. Basically folks, the consensus seems to be that tough economic times are on the way.

“Stimulus” and free money: After surveying the blogsphere yesterday, the chatter seems to be about the proposed stimulus plan that’s being discussed in congress. The bill is currently in the senate, but whats on the table is a tax rebate up to $600 for individuals and $1,200 for couples. Both the Democrats and the Republicans support the stimulus package and everyone seems to want it done fast, so its probably going to happen.

Personally, there may some cause for concern about the stimulus package. Coming up with another $150 billion is likely to add to the federal deficit. In case you haven’t been paying attention the feds have been spending way over their budget for the last twenty years. Another $150 billion in debt can’t be good for the deficit, even in a titanic economy like America’s. I sometimes wonder if maybe we shouldn’t elect our politicians for terms longer than 4 years, that way there might be less pressure for this kind of hasty legislation.

Thanks,

James

Money, money, money

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One of the great things about traveling is checking out all of the currencies around the globe. It certainly takes some added mathematics to sort everything out when landing in a new country, but it is always an experience to see what money is worth in other countries.

Right now my wallet is bulging with currencies from multiple countries. I haven’t had this many different currencies since traveling in Europe before the Euro. Right now I have AFS from Afghanistan, Euros, U.A.E. (United Arab Emirates) Dirhams, or AEDs, Singapore Dollars, Malaysian Ringgit, Vietnamese Dong, and tomorrow I’ll have Thai Baht.

Luckily the travel wallet that James bought me for our anniversary has lots of different pockets, but I do have to pay attention to what currency I’m pulling out. Luckily I’ve had fifteen years of practice converting currency in what is now my fortieth country traveled to!

Cheers,

Miel

Petronas Towers

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Just a quick note before my time is out here. I’m currently in Kuala Lumpur, Malaysia and enjoyed a day at the Petronas Towers. This is the tallest building in the world, 88 floors. The sky bridge is at the 41 first floor.

The interesting thing about the building is that it was built by national oil money. According to their marketing pitch they built it to remind future generations what they can become. Considering that Malaysia’s nationhood is only 50 years old this is pretty incredible. They also support the arts and learning with a science museum, a philharmonic orchestra, and an art gallery in the building.

Very cool place overall.

Cheers,

Miel

200% Tax

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Wow!

Another interesting fact about Singapore. The government can’t prevent people from buying cars, but they can make it hurt. To cut down on traffic in Singapore they have a 200% tax on car purchases. Everything else in the country is duty free. Crazy.

Another comment about the payment for driving that I mentioned in the last post, is that they charge specifically for going to certain areas. For instance, it costs to go into the main financial district. This helps to prevent congestion and seemed to do the trick. They said that London and Malaysia were adopting similar systems.

Cheers,

Miel

Interesting Tidbits about Singapore

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It might be a random topic, but I thought might enjoy a few finance related tidbits about Singapore. First I’d like to say that Singapore is a truly lush and fabulous city, certainly one of the most beautiful and well run in the world.

Home ownership is big in Singapore. In fact, 95% of the population owns their own home. It is safe to say that there is no sub-prime lending crisis around here. 83% of the population owns their own government subsidized apartments and the remainder buy through private lenders since they don’t qualify for subsidies.

Road meters are similar to what folks find on toll roads, but a bit different. You put money on a credit card of sorts, put it in on your dash, and credit rolls off your account as you drive from here to there. The same works for trucks, taxis, and buses, passing the cost on to the customer. Basically this means that those who are using the roads are paying for the roads. As a non-car driver and someone who believes that there should be less people on the road, I find this system to be a good way to make folks realize the impact of their driving on their pocketbook.

No other finance related stuff but I did enjoy a fabulous Hindu festival this morning, at 4am, where guys were pierced 180 times around their body, in the chest, back, cheeks, and tongue, holding up a large parade like headdress of sorts. I can’t upload photos at the moment but it was really incredible.

If you ever have a chance to come to Singapore. Do.

Safe Travels,

Miel

Money can’t Buy

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Hi Folks,

I just wanted to respond to a number of comments that I’ve received over the past months since I’ve been in Afghanistan.

Many of our readers seem to feel that I’m in Afghanistan only for the money and that my values are focused only on the bottom line. While it is true that James & I have a finance blog and that we enjoy personal finance and blogging as a hobby, my sole focus in life is certainly not money.

Another thing to set straight is that most people working in Afghanistan in development are not there for the money. I can’t speak for security folks, as these guys sometimes don’t even know they are in Asia. (Only one case study from Kansas to prove this point! ;-)

While it is true that working in Afghanistan gives extra money for danger pay, on a day to day basis this doesn’t mean squat. Most of us don’t even concern ourselves with money since our budgets are rather streamline. There are more important things in Afghanistan to worry about. This means that there might be more in our accounts, but it’s not like earning more money affects our lifestyle. It actually works against us, as our lifestyles are diminished in ways by being in Afghanistan – but also enhanced in ways that most would find hard to conceive.

All the people I’ve met in Afghanistan, myself included, are passionate about what we do and enjoy working in another culture. Living and working in a place like Afghanistan is not to be taken lightly. It’s not for wusses and no amount of money would make it worth living there if it weren’t for a passion for living in other cultures.

For me this experience was a once in a lifetime opportunity that came at a very good time in our lives. While my job in Washington afforded me the chance to travel about four to five times a year, this isn’t the same as living in another culture. After five years in the states, both my professional and personal needs were pointing overseas.

Before this opportunity came up I had gone through a series of career coaching sessions and had worked with James to identify what next in our lives. When the job opportunity in Afghanistan came up it allowed for me to live overseas and still be able to see James for seven to ten weeks out of the year. This allowed me to fulfill my career aspirations while James is finishing his doctorate. Were I to wait until he is done with his doctorate I would be either pushing the possibility of children to later in life or foregoing my career passions.

The job itself is also a perfect match. I’m currently the Study Abroad Manager and get to lead faculty members on study abroad programs in Southeast Asia for about a third of the year. In college I couldn’t have dreamed up a better job for me. Afghanistan might not be for everyone, but for me it is.

It’s not about the money but the adventure in life. During my college years I saved ever penny I could on college tuition and spent any extra on traveling as often as I could. There are some things money can’t buy, and one of those is passion and desire to travel. People thought I would grow out of the travel bug with time but that just hasn’t happened yet. Money I can get when I’m old, but the opportunity to travel and explore the world is irreplaceable.

I know some of you might not give a hoot what I’m doing in Afghanistan but I figured it might be helpful to provide some more context for those who are interested.

Safe Travels,

Miel

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