As some of you may know, Inuit (the makers of Quicken) have acquired Mint.com (an online money management service); see press release.
Mint claims to be the #1 money management service in the U.S. and it’s hard to not believe them due to the high quality of their service. Their interface is nice and clean, very modern and the application functionality is (in my opinion at least) excellent. Overall a great product to use when managing your wealth.
I had a Mint.com account pretty soon after they launched and it was great, even if they didn’t provide a service for each of the institutions where I held my money initially.
Intuit’s Quicken has dominated the desktop-application market, pushing out the previously popular Microsoft Money and offering a powerful alternative to the standard paper ledger or spreadsheets.
Quicken and Quicken Online has faced a lot of the criticisms. People complain about its learning curve and cluttered interface. Also, Quicken has continued to have a hard time squashing all the bugs with certain features such as automatically downloading transactions. I have Quicken 2009 and love it to create all sorts of fun graphs, but I’m definitely not a fan of Quicken Online.
Not everyone is a Quicken fan, and that has lead to some backlash towards this announcement that Intuit has acquired Mint.com. A couple friends of mine have vowed to close their Mint.com accounts due to their previously negative experiences with Quicken.
Readers: Does anyone have an opinion one way or the other on this issue? Any positive or negative experiences with either Mint.com or Quicken?
I certainly hope that whatever product is released as of the result of this merger resembles Mint.com rather than Quicken Online. If we could have the best of both worlds that would be fabulous indeed.
Back when MySpace and Friendster were the start ups of online social networking, I doubt that many of us thought that such forms of social networking and marketing would soon be a norm of society. We certainly didn’t imagine everyone from news broadcasters to congressional representatives talking about how we should tweet them.
Despite the relatively recent advent of online social networking, the majority of the US has been hooked in one way or another. We are also in the camp that believes they are here to stay.
We DINKs have started Twittering lately and are still getting the hang of how everything works. It reminds me a bit of when I started blogging and had never been on a blog at that time. I would have never thought it would become such a part of my life.
So now in addition to blogging daily, we also provide information and resources to our readers through Twitter and Facebook as well. We encourage our readers to sign up for our RSS feeds, follow us on Twitter and friend us on Facebook to stay in touch.
Ok, stay with me for a minute. For the most part, I’m pretty ambivalent towards 50 Cent. I’m familiar with a couple of his songs, but I haven’t followed his career. However, after watching this video of him on CNBC, I came away equally surprised and impressed with his financial intelligence.
Say what you will about his music, but 50 Cent (born Curtis Jackson) has a very impressive financial record. His highlights include being given the highest sign-on bonus of any artist by a record label (reportedly over $1 million), becoming an initial investor in Vitamin Water (which later sold to Coca-Cola, netting him a post-tax profit of around $100 million), a successful personal marketing campaign that has yielded for him movies, video games and television appearances as well as enough personal wealth to be recognized by Forbes, listing him as a second richest rapper, behind only Jay-Z, a man who has been in the industry much longer than he has.
Watching the video, three things in particular impressed me. First was his strategy for marketing himself, second was his desire to surround himself with people who are experts in their field, and third is his willingness to abandon fear and take risks.
As most people are aware, the record industry has been hit hard by piracy. It wasn’t long ago that Metallica was suing Napster; when access to music for free was easy and widespread. Ever since then, the record companies have fought a very public (and from a public relations standpoint, a very nightmarish) war against pirating music. We’ve all heard the stories about people being sued for hundreds of thousands of dollars and the like. But despite these heavy-handed methods, the record companies are losing this battle, and it’s going to take some innovative thinking for them to start making the kind of money they’re used to again. But 50 Cent has a very enlightened perspective on piracy. He knows that it can’t be stopped, only slowed and even then you can’t do a very good job of it. He talks in the video about not getting mad when people pirate his music. He understands the power of a brand, and the fact the he himself is a brand, and any way that you can put your brand out there is good. He talks about how people might steal his songs but go to his concerts (where musicians make most of their money anyway), plus he’s been able to leverage the power of his brand into other money-making ventures, such as the aforementioned video game and movie. That willingness to be flexible enough to adapt to a changing environment is something that we all can take a lesson from. He properly assessed a situation (the current state of the recording industry) and changed his actions to put himself in a better place to deal with that situation (by leveraging that changing environment into an opportunity to expand his brand). He knows that when he builds his brand, he is able to build his wealth.
The desire to surround himself with experts is such a huge thing, and really shows a lot about a person’s intelligence and humility. Speaking for myself, I sometimes find it hard to reach out to others who are better at something than I am. I may recognize their superiority, but nevertheless, I try to do it on my own. And in doing so, I deprive myself of an important learning moment. Failing to leverage the skills and experiences of others only hurts you. In 50 Cent’s case, he sought out author Robert Greene after reading one of his books in an effort to collaborate on a new project.
I’m reminded of a 60 Minutes story I saw a while back with LeBron James where he talked about his friendship with Warren Buffet. Far from a superficial friendship, Lebron has stated (and Buffet confirmed) that he has frequently called Buffet to get his take on certain projects or investment opportunities (in fact, LeBron James’ financial/marketing smarts are so well developed he probably deserves his own post). The music, sports and film industries are very similar in the sense that a lucky break here or there can take you from very poor to very rich in a heartbeat, and it says a lot about an individual willing to recognize the craziness of that situation and seek out advice from those who can grant a little perspective. Unfortunately, not all of these instant millionaires do this; a recent study conducted by the NBA Players Association estimated that 60% of retired NBA players are broke only five years after retiring from the league (average NBA salary: around $5 million).
In the video 50 Cent talks about how he’s not afraid to take on risky investments because he’s already been through much worse. And that is definitely true. He lost his mother when he was young, he grew up in one of the toughest ghettos in New York City, he started selling drugs at a very young age leading to multiple run-ins with the police, and he was shot multiple shot (once in the jaw, causing his trademark slur). After going through that and being a successful musician, he has to feel like he’s playing with house money at this point. What if he had invested in Vitamin Water and they had tanked, losing him a bunch of his money? Is that really worse than what’s he’s already been through? But by taking those risks he’s managed to put himself in a position to maximize his earning potential. Granted, I’m sure he has a team of financial advisers working for him but 1.) he has to be smart enough to hire good ones and listen to them and 2.) if it was that easy, every rapper/actor/musician/artist who made it big would continue to grow their wealth. Which we know isn’t true, as we hear about a multitude of rich celebrities declaring bankruptcy all the time.
He may not have an economics degree from Harvard, but it’s hard to look at 50 Cent and not take away some solid lessons. In the video he talks about living below his means, about how waking up every morning in Mike Tyson’s old house (which he’s trying to sell) is a daily reminder that money can be lost as quick as it can be made. Despite the hosts of the show not giving him 30 consecutive seconds to express his thoughts, I came away very impressed. It seems like he is a man who is not only money-conscious, but the type of person willing to put in the work to ensure that he wealthy status stays that way.
I read an interesting article on msn.com today about the Five Lowest Paying Majors. Those majors are:
Social Work
Special Education
Elementary Education
Home Economics
Music and Dance
Home Economics is the only one I don’t understand. I don’t remember any classes like that being offered any place I’ve been, so I can’t really speak to what that’s about, but I did find it interesting that the first three majors listed were professions that require a decent amount of self sacrifice performed in service to others. Music and Dance isn’t much of a surprise, as most of the arts lead to jobs that are in all likelihood very fulfilling on a personal level, but not so much on the bank account level.
An interesting facet of the list of lowest paying majors is that most of them are in areas that are considered “callings” more so than careers (i.e. an actress is more likely to be passionate about her acting than an accountant is about accounting). This is important for anyone interested in one of those professions, because with the money as limited as it is, it’s important to feel like you’re doing what you’re doing for a reason.
The author of this article offers many suggestions for those interested in an area that typically has lower paying jobs, such as minor in something to round out your education, go to graduate school and be selective about the internships you take, but probably the best piece of advice that he gives is to be passionate. He points out that you can be financially successful in those areas, but doing so requires being very passionate, having a high risk tolerance and the ability to get up and work harder every time you get knocked down. Most importantly, you have to love what you do; if you do, then the extra work necessary to be successful (financially or otherwise) will all be worth it – advice fitting for anyone in pretty much any career.
I have a couple friends who have eschewed the opportunity to make money in a traditional career for the opportunity to do what they love for a living, fate be what it may. They may not be able to build a ton of wealth, but if they are frugal and and make wise choices, they will be fine. Although initially hearing those decisions gave me heartburn (health insurance! retirement! money! stability!) I’m not only extremely proud to be friends with such passionate and driven individuals, I also admire their courage and am a little jealous of the strength that they’ve demonstrated in choosing to take the riskier path in the hopes of carving an existence out of doing what they love for a living.
I have two pets, a cat and a dog, and I love them very much (something I have to remind myself sometimes when standing out in the snow at 6 o’clock in the morning, waiting for my dog to find the EXACT… PERFECT… SPOT to do her business). But there’s no question that pets are a money sink, especially if you are one of those people who has taken full advantage of all the pet services that are out there these days.
Getting the cat was easy. My wife was working in South Carolina at the time, and I went down to visit her one weekend. We were bored, so we went to the local animal rescue center. Before going inside, my wife made me promise her that I wouldn’t let her get a dog; saying that it was possible that she could see a puppy, fall in love and then do everything in her power to convince me that getting it would be a good idea. I agreed, and an hour later we walked out with a 3 month-old kitten.
The dog was a bit longer, more well-thought out process. Although not by much. We got it in our heads that we wanted to get a puppy, but became discouraged by the high initial cost. Ads in the Washington Post demanded hundreds of dollars for puppies, and that was simply too much. Thankfully, we were able to find a family in Richmond with a litter of beagle puppies willing to part with one for $50 which was a big savings compared to the hundreds we could have spent. We paid, and our current family was complete.
I had two dogs growing up, so the true cost of owning an animal came only as a mild surprise. Even so, there are many financial elements that go into owning a pet, and the costs can quickly eat a hole in your budget. The initial purchase of a dog is usually around $100, but can be much more depending on where you get the animal and what breed you’re interested in. We bought our dog for $50, which is extremely low, and fortunately we were able to verify her ancestry to ensure that she wasn’t just another puppy from a puppy mill. Our cat was a bit more; we got her from a shelter and she cost around $80, including the vet fees, tags, etc… So while we were able to get two pets for cheap, this isn’t typically the case, especially if you’re buying from a family.
A cursory glance of puppies for sale in the classified section of the Washington Post yields results for puppies costing anywhere from $300 (for golden labs) to $2,100 (for English bulldogs). The initial cost is staggering; even the shelter around my apartment charges up to $200 per animal. Added in with that initial cost is the cost of the first visit to the vet – which typically is more expensive than subsequent visits as your pet gets a full checkup – first-time medication, toys and other equipment, as well as spaying or neutering costs. Spaying and neutering is especially expense; however, many organizations offer programs to reduce the cost of the procedure; my wife and I used one of these programs and our total out-of-pocket expenses were less than $100.
Obviously the budget hit is reduced after that first year, as the only recurring expenses become vet and food expenses. Even so, this year I’ve spent a total of around $450 on both animals for just the vet bills, not including the cost of boarding both of them while my wife and I got married. Food has cost me around another $400 total for both pets. Thankfully, both animals are in great health, otherwise, the vet bills could have been even more significant.
This isn’t even taking into account other ways that people spend money on pets, such as: grooming, animal clothes, animal health insurance, anti-depressants (yes, this is real) and doggy hotels (complete with television).
Pets can be expensive, and unfortunately, this is a fact that is all too often lost on a first-time pet owner. The responsibility associated with having a dog (or any other pet for that matter) can be quite great, and regretfully this can lead to a number of terrible situations. Animal abuse, over-breeding and abandonment are just a few of the possible negative outcomes of someone getting in over their head when they decide to get a pet. An animal is a living member of the family who has an associated daily cost and a measurable budget impact. These factors should be taken into account before getting a pet to ensure a successful and happy relationship between pet and owner (as well as a happy and balanced budget).
While many of our readers are students themselves, having worked and funded my way through school on loans, I still find it interesting to look at trends related to student borrowing.
According to numbers from the U.S. Education Department, federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. While borrowing has wavered over the years, this is an all time high.
Other interesting stats are that 2/3 of students today take out loans, and the average student loan debt upon graduation is around $23k. While this might seem normative now, it is good to keep in mind that only ten years ago this was $13k. A recent article from the Wall Street Journal, entitled “Students Borrow More than Ever for College: Heavy Debt Loads Mean Many Young People Can’t Live Life They Expected”, gives a great deal more detail about the sacrifices that those harnessed with student loan debt are forced to take. The article also discusses a bit about how availability of loans has driven up the price of schools. “Saving money” on school simply is not really an option today.
I personally am grateful that loans were available to allow me to go to college. Without them I would simply not have been able to go. Even with maxing out my available student loans and scholarships I still had to work two jobs to pay for the next semester. Having paid for ever dime of my masters as well, it feels extremely good to have them paid off in full!
There have been numerous signs that the economy is turning around in the United States, but one factor that has continued to be a black eye on our economy is the unemployment rate. According to the Bureau of Labor Statistics, in a report released September 4th, the current unemployment rate rose to 9.7%, from a rate of 9.4% in July. Even the most stable industries are being affected, and mine has certainly not been immune.
I’ve been fortunate enough to not be directly affected (i.e. I haven’t been laid off) but the specter of tough economic times has loomed, as I’ve seen friends and colleagues lose their jobs, or get reassigned to less glamorous positions or locations in an effort to trim the bottom line. Obviously this situation has been very stressful, as our friends in the financial industry has been able to attest to for the last two years. This stress permeates all aspects of a person’s life, and it’s tough to see people you care about and respect fall victim to our economic troubles.
So it seems that the most important thing that we can do to mitigate any potential career troubles would be to prepare ourselves, so that if something bad happens, we’ll at least have a soft landing.
The most important thing to do is take care of your current career, starting with first doing your job well, and secondly, having a good relationship with your boss. I’ve been fortunate enough to be mentored on the importance of both of those factors, and been especially fortunate to have a great relationship with each boss that I’ve had. When I first started seeing people getting laid off, I would get really worried and stressed out, obsessing over every little incident at work, dissecting the minutiae of every conversation with people in authority.
But the best piece of advice that I received during that time was just to relax and do my job. To take care of what I need to take care of and accept that if something bad is going to happen, then at least I will have done everything possible to put myself in the best situation. Having someone that I respected so much give me that piece of advice was enormously influential, and it has helped me cope when the economy started going through tough times.
In addition, there are still many things that we can do to prepare ourselves if something happens.
Build an Emergency Fund
This is probably the most important step. After all, we all need a roof over our head and food on our plates. Most experts recommend you stow away enough to be able to pay your bills for three to six months, depending on your job situation, economic health, and the presence of other more pressing needs for money. I struggled with this when I first started working. I went about six months without any emergency fund at all, and then when I did build one up, I found myself drawing on it every once in a while for things that we less than essential. It’s important to stock that money away; put it in a high interest savings account and leave it alone. You never know when you’re going to need it.
Build your Social Network
This step is the most important for finding a new job. There are many resources out there that can help with this (Facebook, LinkedIn, even Twitter in some cases) and you should find the one that works best for you and maximize its potential. It seems as though nothing is more important that personal relationships, however. Everyone I’ve known who has lost their job for whatever reason has been able to find a new one because of the strong relationships that they had built up throughout their career. This is harder for people my age, because we don’t have years of industry experience and the associated relationships to draw upon. But even so, former employers/colleagues, college professors and even family and friends can all be great assets when looking for that next position.
Evaluate your Budget
If you’re aware of how you’re spending your money, it can be easier to cut back during lean times. I’ve revised my budget countless times, and with the help of such tools as Quicken, each time I feel like I’m getting a better handle on the best way to allocate my money.
Know your Employer’s Termination Policy
This is a step that I wouldn’t have even considered had it not been for the experience of one of my co-workers. Knowing your rights as a terminated employee can be crucially important, especially when it comes to the reasons why you were fired and your severance package. Knowing what to expect can certainly help as you go through the process of exiting your job.
Grow your Skill Set
Often times I’ve had to take on tasks that were outside of my specialty. While I may not have necessarily enjoyed those tasks, they are marketable skills that could help me find a new position or keep me with my current employer if the company finances take a hit. Any skill set gained is value-added to your employer. A lot of big companies have internal training programs. They’re often boring, and I know I struggle finding time to complete them, but that’s a quantifiable way to show your value.
Maintain External Sources of Income
I graduated three years ago, and outside of my primary employer I have collected paychecks from four different organizations. Most of them have been one time deals, and the money hasn’t been enough to replace my full-time salary, but it’s always nice to have a little extra money. Which becomes even more important if you lose your job. A little money coming in is better than no money coming in, and I know of instances where a part-time hobby has turned into a full-time position. It can sometimes be hard to find little pieces of work to add to your income, but those opportunities are out there if you open yourself to them. Love for money making opportunities whenever you can. Think about how you can do things on the side, and you just might end up with one beautiful nest egg.
These are the types of things that I’ve always been told to do, regardless of whether I feel like I’m on the chopping block or not. As with anything, the best way to deal with an unfortunate situation is to prepare as much as possible ahead of time. Hopefully, this isn’t something that I or anyone reading this will have to experience one day, but if it does, this preparation will certainly help soften the blow.
So I’m working through Felix Dennis’ How To Get Rich in my spare time. He’s got a great quote on wealth and luck that bears repeating here.
Chances come to everyone in life, in all shapes and sizes, often disguised, and more often radiating risk and potential humiliation. Those who are prepared to analyze the risk, to bear the humiliation and to act in deadly earnest — these are the “lucky” ones who will find themselves, when the music stops, holding a potful of money.
Essentially what Dennis is saying is that luck has very little to do with becoming wealthy and building wealth. Instead its more about hard work, being willing to take calculated risks and believing in yourself. This will help you become one of the “lucky” wealthy individuals.
Frequent readers know that we are big Portland fans and love the real estate there as well. One of my twin sister’s friends is selling her condo and it is gorgeous. I had to share for some fun weekend real estate oggling. It’s like the open house without having to leave your own!
Psychology plays such a huge role in how we manage our personal finances, and yet it is often overlooked when attempting to explain our behavior. We’re often told to not let emotion get in the way of making solid financial decisions, but what exactly does that mean? A major psychological effect that a lot of us experience when investing is something called “cognitive dissonance”.
Cognitive dissonance occurs when someone holds two contradictory ideas or behaviors at the same time. Having two contradictory ideas, beliefs or behaviors at the same times causes such feelings as anxiety, guilt, anger and embarrassment, and often leads to the individual attempting to rationalize in an effort to resolve the apparent conflict.
The most famous example of cognitive dissonance is one of Aesop’s fables, the story of the Fox and the Grapes. In the story, a fox comes across some grapes. He tries to reach them, but is unable to. He finally gives up, rationalizing that they looked sour anyway. In the story, the fox had two contradictory ideas and actions (the desire to eat the grapes and the inability to reach them), which caused him enough stress that he had to reconcile the issue by asserting that they looked sour, despite the fact that they weren’t.
Cognitive Dissonance appears in all aspects of our lives. With regards to money, examples can be found in two major areas: how we spend our money and how we invest our money. As a personal example, my contract with Verizon recently came up. The phone I had up to that point was perfectly fine. It worked great, there were no major problems and in fact, it was only about a year old, as the first phone I bought on that 2-year contract had broken a year ago and had to be replaced. There wasn’t going to be a penalty for not re-signing my contract; I would pay the same amount and outside of a few pestering phone calls from the Verizon folks, there really wasn’t going to be much of a difference between being on a 2-year contract and not in the short term.
So the rational thing to do would be to keep my old phone while it still worked (and I was happy with it) and when I actually needed to get a new phone, I could. I would have the added benefit of deferring the inevitable cost of a new phone, and by holding out, I might wait long enough for something cool like the Palm Pre or the iPhone to come out on Verizon’s network.
So what did I do? I went ahead and renewed my contract the day it was up, thus allowing me to get a sweet deal on the BlackBerry Tour, of course. The benefits of not signing a new contract right away directly conflicted with my strong desire to buy the coolest new technology. Ultimately, I told myself (and my skeptical wife) that my old phone was probably going to break soon (it wasn’t) and the new BlackBerry had so many cool features that it was worth it (somewhat true). That rationalization was all I needed to resolve the issue between those two thoughts, and two days later I was setting up my new phone.
This cognitive dissonance created while spending money can cause anxiety leading up to the purchase (“I know I shouldn’t but…”) and shame and guilt afterwards (“I probably shouldn’t have spent that much money on that”). How we resolve those feelings is to justify it.
Common justifications I use are: “It was on sale”, “I’ve been thinking about buying one for a while”, “I deserve something new and shiny”, etc… Being able to justify our actions (whether it’s a solid justification or not) alleviates that guilt and we’re free to enjoy what we’ve purchased, even if in the long term that decision is proven to be the wrong one.
But it’s not just our spending choices that can bring about cognitive dissonance. It’s often seen in our investment choices. William Goetzmann and Nadav Peles wrote an excellent paper published in the Journal of Financial Research entitled “Cognitive Dissonance and Mutual Fund Investors” where they attempted to understand why investors continue to stay with poorly performing funds, despite the fact that logically, they should move their money elsewhere. In the past, this behavior had been attributed to a number of different factors, such as high transaction costs, poor research, general irrationality, etc… and while not completely discounting the influence of those factors, they explored possible psychological explanations for that behavior.
They did this by surveying two groups of mutual fund investors, and found that even the most respected and well-informed investor tends to alter their perception of the past poor performance of their investments. Cognitive dissonance is all about people revising their attitudes about a certain idea in an effort to reconcile logical contradictions. When the opportunity presents itself to make those revisions, investors tends to take it, thus allowing them to feel a greater level of comfort about their decision, which in turn allows them to stick with the poorly performing fund for a longer period of time. The referenced paper is more extensive than I have presented here, and it’s definitely worth checking out if you’re interested in this subject.
This begs the question: how do we avoid falling into this trap? First of all, it’s impossible to completely avoid this manner of thinking. Financial decisions are rarely black and white, and everything is a cost-benefit analysis, so there will always be logical wiggle room when presented with scenarios such as the ones described above.
The key is to recognize when we’re making a logical leap. As with every financial decision, careful planning and recognition that our emotions and psychology affect how we behave is a crucial step in ensuring that we don’t fall victim to irrational behavior that will prevent us from building wealth.
As some of you may know, Inuit (the makers of Quicken) have acquired Mint.com (an online money management service); see press release.
