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Monthly Archives: July 2008

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Buy for Now

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There’s a little principle in shopping that generally tends to minimize the amount of buying. When you are considering a purchase, consider how much you really need this now?

It is very easy to buy stuff for someday. Don’t fall prey to this mindset. To give a few ideas of when you might run into wanting to buy something that isn’t in the now:

Season. Buying clothing for another season. While end of season sales can be tempting, I’ve learned that it is much better to avoid falling prey to buying clothing that you don’t need now. Buying for the next season is a problem in that you very well may not like it as much, and overall it won’t feel as new. This will defeat the feeling of having something new in your closet.

Size. Buying clothing for a size you aren’t today. While it is tempting to want to buy something that is smaller – just don’t do it. If you must, reward yourself once you have lost the weight.

Occasion. While you might find some outfit that is great but you don’t have a place to where it, don’t bother. Only buy when you have somewhere specific to where it. This will save you from having a wardrobe that hasn’t been worn.

Separates. If you have to buy something else just to pull together an outfit, then don’t bother. If it doesn’t fit into the rest of your closet then you might change your mind about it later anyway.

Placement. If you don’t already have a place of it in your house. If you can’t pinpoint exactly where and why you need it, then don’t bother.

Lifestyle. If it doesn’t fit into your current lifestyle, then take a pass. Even if it is for some future version of you.

With a life on the road, and a tiny apartment as my base, these questions pretty much rule out anything. Considering that Afghanistan is not a fashion show, this rules out everything else.

Tonight I considered the possibility of buying some very beautiful and well priced fine boned china. In the end I just couldn’t do it, as it would have been buying for the potential of where my life might be at some point in the future. Being the vagabond that I am, five years out would be able as early as I would dream of having more than a cafe table for dinner. Therefore, for now, china won’t be in the cards. This will save me money and hassle in bringing things back as well!

Readers: If you’ve got tips on how you talk yourself out of purchases, we’d love to hear.

Cheers,

Miel

Moneydance

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We were tipped off a few weeks ago on a recommended finance management software, Moneydance. I checked out their website and then wrote and asked them for a complimentary software license to try out and review for our readers. They were nice enough to oblige and sent us a license key right away.

Their website boasts that the are “The Most Intuitive Personal Finance Software.” I was of course excited to see this in action. I downloaded the software and then started to try and set them up. Initially I was very confused by the format, as when you are first setting up a new account it asks you to plug in the amount in the account – rather than it pulling it from online. Apparently you have to go through an additional step to set it up for online banking.

I then figured out how to set it up, but they didn’t have ING Direct as an option for online banking. Since all of my checking and savings accounts are with ING, I was obviously concerned with it not being there. Considering that ING is a major banking institute, I was surprised at them not being compatible.

It tells you that if your bank isn’t listed that you should write to Moneydance and your banking institute. I did so, and got back this reply from the folks at Moneydance:

“ING Direct doesn’t actually use Direct OFX, which is the advanced protocol Moneydance uses to connect to banks.
You can of course download the QIF or QFX files directly from the website, and then import those into Moneydance.”

While apparently it’s ING that doesn’t use the advanced systems of Moneydance, in the end its the same for me. Downloading and importing files does not warrant the most intuitive financial management.

So I guess in the end I’ll have to keep on looking for a viable money management system. I’m just glad I didn’t pay for the software – as I’d then be engaged in a fight for a refund.

Readers: If you have any other suggestions, or comments on your own experience with Moneydance, I’d be happy to hear.

Cheers,

Miel

Cheap Pearls

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I’m an advocate for minimalism when it comes to buying extras, particularly when it comes to cheesy souvenirs. I however, am also in love with pearls. I’m a Gemini at heart.

Here in Bangladesh there happen to be very high quality and inexpensive pearls. You can buy a nice basic set for around five bucks.

In the end I couldn’t help it and bought a number of sets for taking back to family in Oregon. I also found some incredible strands of sapphires and rubies as well.

Even though I spent a bit on gifts, and for myself as well, I still kept in mind only buying specific pieces for specific people in mind. This helps to avoid just buying for the sake of buying when it’s cheap. I did throw in a few sets of pearl earrings, at a dollar a pair, just to play it safe in case I forgot someone. In the end the merchant threw these in for free anyway.

Considering I haven’t bought any souvenirs during my past year abroad, I think it is money well spent. I’ll also be getting bonus points for remembering my grandmother’s upcoming 20th wedding anniversary and keeping my twin sis’ Birthday in mind.

Best of all, I also bought three different unique sets of pearls for myself, meaning that I won’t be left wanting for pearls. All together I still spent less for everything then I would have on one set at home.

Cheers,

Miel

Budgeting for a Home Visit

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James’ mom Carol grew up in New York City with a father whose philosophy was that leaving the house equaled spending money. While given my lifestyle it’s quite apparent that I’m not one for staying in the house, I can’t disagree with this sentiment. This is particularly the case these days with increasing prices.

For us this also includes spending more just to go home. We head to Oregon next week, and while it will be a great savings in comparison to meeting somewhere else in the world, it will still cost us.

We are lucky that in the end James’ moms saved us from having to rent a car by offering up their Eurovan camper named Lilly. This means that while we’ll have to pay a bit more in gas prices, we won’t have to pay for a rental car or hotels. Best of all it means that we’ll have flexibility to go where we like and camp along the way.

Even with these reduced savings it still adds up. I just did a quick budget for our ten day trip and it looks like we should expect be shelling out around a grand – even with staying with family and having many meals at home.

In addition to what we expect to pay, I had to shell out around $1,600 for a ticket and had $700 of that reimbursed. Luckily I got James ticket for five bucks and 25,000 in frequent flyer miles.

While we’ve budgeted for these expenses we’ll certainly be leaking money even if we make an effort to keep things on the frugal side. Though we would like to avoid leaking money like a sieve, we are also very much looking forward to seeing each other as well. In the end it will be worth it.

Looking forward to it!

Miel

Dumping Your Partner Over Debt?

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Hi All,

Here is an interesting question for you. I was cruising the craigslist forums and I came across a posting by a guy who kicked his fiancee out of the house because she lied about having $60,000 in debt.

Supposedly, it got ugly. This guy packed all her stuff in cardboard boxes and pitched it out on the street. Then, he threw his fiancee’s credit cards at her “like ninja stars”. Later on he said that he she had to sleep in the office or in her car (clicky).

Pretty hardcore.

While I can’t condone the way he broke up with his finance, I do think that a serious breach of trust such as failing to disclose $60,000 in debt, under some circumstances might be grounds for ending one’s relationship – at least before you’re married.

But here’s the question: is it okay to dump your partner for lying about debt?

Best,

James

What Drives Interest Rates?

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Hi All,

This posting is quick educational piece on interest rates. If you have a mortgage, a car loan, or a credit card, then you probably are concerned about interest rates. If you don’t, here is a hint: interest rates are essentially the price paid to borrow money.

But what causes interest rates to rise and fall? Well, it turns out there are several reasons for their fluctuations.

1. Federal Reserve Action: The federal reserve is the nations central bank and among other things, is responsible for setting interest rates. They use a variety of mechanisms to do this. But primarily the interest rate is determined by the Federal reserves’ Open Market Committee (FOMC), which sets the federal funds rate – or the rate that banks can charge each other for loans. When the federal reserve changes the federal funds rate, most other consumer rates change also.

Please note the federal funds rate is not the “prime rate” that you’re used to seeing on credit card and loan statements. The prime rate is a summary of rates charged by banks for favored or “prime” customers. Right now that’s big corporations.

2. Inflation: A second big factor impacting interest rates is inflation. When inflation starts increase, the Fed usually has to jack up the interest rate to slow it down.

3. Economic Activity: This is the major determinant of interest rates. The more economic activity there is, the greater the demand for money. Consider this, if the economy is healthy then there will be a need for more money to pay people, invest in improvements, and purchase consumer goods. When this happens, the federal reserve usually takes action to increase the money supply by lowering rates. Hence, economic activity is a root driver of interest rates.

Thanks,

James

p.s. If you like this “nuts and bolts” kind of stuff, check out our posting on the federal reserve.

Whats Up With the Economy?

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Hi All,

So, last weekend I got back to civilization from having taking a weekend camping in Virginia. Being in the woods away from 100% media access gave me a bit of perspective on the news. And, the news is that the economy is in rough shape. So, I’m trying to put everything together to figure out what the story is.

Its pretty clear that the US is a recession. But, what does that mean anyways?

Recessions are cyclical events which occur when demand slows down. In response to decreased demand, producers lay off people and decrease their consumption of raw materials. Unemployed workers have less money to spend, so demand decreases. Employed workers fear job loss so they spend less money. Investors fear the value of companies will decline so they are less willing to purchase stocks or invest. All these factors coalesce into a messy downward spiral. Bottom line: profits are down and its hard to get a job.

But whats causing it? There are several factors?

1) High Oil Prices:
Natch. This is the obvious reason. High oil prices are decreasing the efficiency of companies that specialize in transportation, heating and commodity production. When gas prices increase, then it means that people don’t have the bucks to buy or invest in other things. Right, so if you’re forking over 4 dollars a gallon, who’s got money for a new lawnmower or a steak?

2) A Big Trade Imbalance:
In the first quarter of 08, the US had a negative balance of payments of 178 billion. Right, this means that we brought in 178 billion more of goods and services than we had going out. However, whats important about this is that we are importing consumption and exporting production. Right, so to put this in plain language, more of our economic life surrounds cheap stuff from Wal-Mart, rather than making cars, electronics, or durables. Basically, we are importing a ton of cheap shit and in return are loosing high paying manufacturing and professional managerial jobs to Asia.

3) The Subprime Mess:
– This is classic. Back in 04 you didn’t have to be Merlin the magician to know that real estate prices were gonna come down.

The subprime mess is contributing to the recession in at least two major ways. First, a lot of people stopped paying their mortgages. Second, many mortgage loans were bundled together and converted into bonds. These bonds were partially secured against the cash flow provided by the mortgages. So when the mortgages went south the bonds became worthless as well. Its hit the balance sheets of many big financial corporations pretty hard.

Best,

James

Gas Prices Got You Down?

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Hi All,

Unless you’ve been living in the woods, you’ve probably noticed that the price of gas is increasing like crazy. But, other people may have it worse off than you. For example, in some parts of the south people are spending upwards of 16% of their total income on gasoline. And in California, they’re paying nearly $4.69 a gallon.

Check out the NY times graphic over at The Wild Investor.

Its actually quite disturbing.

Best,

James

5 Rock Solid Tips For Building Wealth

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Hi All,

Last night on the subway I was reflecting on the purpose of this blog. The blog serves a lot of aims, its a side business for us, a chance to share our views, but ultimately its about improving the lives of the people who read it. So, I wanted to share what many consider to be 5 rock solid tips for helping you build wealth.

1) Own your own home:

Home ownership helps you build wealth in at least three ways. First, real estate is an asset with a healthy long term track record. Second, typically mortgage interest and real estate property tax are deductible. Third, mortgage payments usually help you build equity and are therefore a form of forced savings. Owing real estate is such a good idea, I’ve told all my friends. Repeatedly. They’re sick of it.

2) Set goals, prioritize and focus:

We figured out in the first year of our relationship that if you set goals, prioritize and focus your financial goals are far more likely to be achieved. I’ll repeat this. If you set goals, prioritize and focus, you WILL achieve your financial goals. To illustrate this with an example, we’ve set and met three major financial goals totaling $65,000 in the 4 years of our relationship.

We are not the only person to make this point, best selling finance author Dave Ramsay does as well.

3) Invest in stocks:

Over the long run, owners come out ahead under our system of democratic capitalism. To get maximum return on your money, you have to have some exposure to common stocks. Why? Making money on the appreciation and on the dividends will help improve your bottom line.

I recommend that you hit the books, figure out how to value companies and buy stocks. Don’t buy just any stock. Its got to be a company with a long term track record of making money, preferably lots of money. Other stuff like management, industry, company size, etc. are all important. But, profitability is the main thing.

4) Don’t spend more than you earn:

This is a no-brainer. Right, if you have 100 dollars, but rack up debts of $500 on your credit card, then you’re in the red. Doing this over the long term is a recipe for bankruptcy. But if you got 100 bucks and only spend $80, then your bank account is healthy and you’ll be happier, more in control if your life and better prepared to take whatever challenges come at you.

5) Pay off high interest debt:

Usury sucks. Many credit card companies are usurious and attempt to engineer you into an agreement whereby your borrowing terms are stacked in favor of credit card companies. Other lenders like payday loan companies do essentially the same thing. In some of the arrangements, the borrower will be forced to pay upwards of 200% or 300% interest on their loans. Here is a hit for you: if you’ve got high interest credit card debt or payday loans, pay them off immediately. Bite the bullet, sell some stuff, beg, do what you have to, but pay these types of obligations off immediately.

Just as a side note here – many credit card companies are honest, reputable and charge reasonable rates. My wife Miel – the other author on this blog – is very good at working with these types of companies to harvest reward points, etc. That said, be careful and do your homework when dealing with these guys.

So, just to sum this posting up, these 5 things have been effective for us in the past when building wealth, they will also work for you as well.

Best,

James

Science of Getting Rich

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I came across and interesting piece recently that I thought readers would be interested in. My friend found this article after looking further into the origins of The Secret’s foundation. This is a book written by Wallace Wattles in 1910 about the Science of Getting Rich.

I found it valuable to read through the entire book. Given the time period that it is written in, a great deal of the language is a bit old school. Some of the statements are certainly controversial so I’m certain to get some comments from those who don’t buy into this guy’s theory. At the same time I like to provide our readers with a wide range of theories. In my view it is best to take what works for you and leave the rest. If it doesn’t resonate with you then it likely won’t make a difference in your life, no matter what the content is.

For the purposes of making it easier on our readers, here is a selection of quotes from the book, so you are getting it right from the source. According to Wallace, here are a few tips on getting rich:

hold a clear and definite mental image of the things he wishes to have, to do, or to become; and he must hold this mental image in his thoughts, while being deeply grateful to the Supreme that all his desires are granted to him

give to every man a use value in excess of the cash value he receives, so that each transaction makes for more life

always creative and never competitive in spirit

entertaining a lively and sincere gratitude for the blessings

deep and continuous feeling of gratitude

unwavering faith and devout gratitude

riches they receive will be in exact proportion to the definiteness of their vision, the fixity of their purpose, the steadiness of their faith, and the depth of their gratitude

Overall I think it comes down to being consistently in alignment with your vision. It isn’t a matter of focusing out in the future though, but on how you are being in the present. As you can never be in the future. You are always in the now. It’s also all about what you put into it.

Enjoy,

Miel

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