Do You Reddit? Well Sorry

Sometimes I measure my growth in not new habits I take on but the bad ones I stop.  One of these is using Reddit.  A very popular site that aggregates news and allows for commenting.  Here is a good example below which showcases a conversation about a potential theory about the NFL canceling Freaknight so it would be ready for the Seahawks game the next day.  Really... I just wanted to know when I would be getting a refund but there went 10-20 minutes of productivity to meaningless reading.  Thats why I am going to stop reading this stuff on Reddit.

http://www.reddit.com/r/Seattle/comments/2l0yna/anyone_know_why_freak_night_was_cancelled/

The paradigm of working to providing money for the family or time

In work you get paid more and given more responsibility based on your experience level/years of service.  With the average length of duty at any one company being much less than 10-15 years it certainly logical to agree with the saying "learn in your twenties and earn in your thirties".  There is a disparity and disconnect in this traditional career path.  In your twenties you are paid the least and in essence you put in the most effort.  (Related reading: The Crossover Point)  In your thirties you tend to get married/have kids and your level of effort dips at work.  I ask the question why is there a dis-correlation between pay and effort?

There is a paradigm shift where they must ask the question now that I have hit my stride in my career... do I pull pack and re-configure my efforts to providing more money for my family or provide more time with my family (less time at work). 

Perhaps because many people take the "path of more time with my family" that those who chose to take the career orientated route are rewarded with higher career paths due to less competition.

Quote of the Day

"Start thinking outside the Wall Street Box"

Let Me Reserve The Right to Change My Mind: Car Financing

It's a shame that we can backtrack on what we say but here is my attempt to...

Once upon a time I thought financing a car was out of question. I thought it was best (if you had the cash on hand) to pay cash especially for a depreciating asset such as a car.  However you need to look at the bigger picture and arbitrage interest rate... In other words what could you have done with that money and turned it at a higher rate than the car loan was.

1.99% car loan < 4-6% stocks < 10%+ alternative investments

A car loan is cheap free money... The take away is there is no clear cut answer.  It all depends on comparing the intrest rate and playing the arbitrage game.  WMD: This is not a free pass to buy an expensive car that you would have bought otherwise.

Opportunity Fund

I don't like the term Emergency Fund.  It comes from a scarcity mentality.  Going for lets call it an Opportunity Fund to take advantage of deals to come in the future.

Luck = Preparation + Opportunity

Best Practice for Emergency Funds *Warning not for Dummies

*Warning not for WMDs = Weak Minded Dummies

Conventional advice would be to have at least 3-6 months of living expenses in case you lost your job or some emergency (car accident, car failure, medical emergency, etc).  The reason is so you don't turn to a high penalty form of quick cash such as a pay-day money loan or credit card (20+%).

The proposed best practice is to contribute to your annual maximum or as much as you can to your Roth IRA account ("oh my you should be doing this already")  and in case of an emergency you are able to withdraw all your CONTRIBUTIONS, penalty free with a turn around of a couple business days.  For 2013 the max contribution is $5,500 a year.  If need the cash you are able to call your broker and say you want to withdrawl that amount PLUS any other CONTRIBUTIONS.  So that means if you have been adding money for the past 4 years, you are able to withdraw $5,500x4=$22,000 penalty free.  Caviot say your investment has gone down you obviously won't be able to take it out and if your investment has gone up you will only be able to take out your CONTRIBUTIONS, $22,000 in this case.

Money sitting around waiting in a low interest bank account or CD/Money Market is the best way to ensure inflation and lost opportunity passes you by.  The experts say don't touch your retirement because of 1) tax penalties and 2) lost appreciation.  1) this strategy has no penalties as long as you are withdrawing CONTRIBUTIONS.  2) Your alternatives are taking a 20%+ loan or 8-12% in the RothIRA, it is a simple analysis of what interest arbitration.

Investing in Trinkets

"I sold my beanie baby for 200 dollars"

Searching through past ebay sales I found a rare beanie go for typically on the high end for 200 dollars.  I'm not going to debate the Present Value and Calculated interest rate.  However please consider the sunk costs of keeping it for that long, possibility of losing it, storage costs, high transaction costs to sell, inflation, and the fact that this is not typical only 1 out of 100 of your prized Beanie Babies sell at this price.

Silver coin - Around 1943 nickels were made out of silver.  Today (2013) a 1943 nickel can be had for 8 dollars.  See table below a nickel investment for 70 years yield an annual interest rate of 8%.  Please keep in mind inflation.

Magic of Compounding FV Calculator
Initial	APY	Years	Yearly Add	FV
$0.05	8%	70	$0	$8
Inflation PV (3%)
$1

In short, sell your crap and put it in a different investment vehicle.

Other wonderful reading: http://20somethingfinance.com/the-junk-wax-era-sports-card-investment-bubble-and-crash/

Seattle Real Estate Modeled for 2013-2017

As of 6/2013:
2007Q2 - Top of Market
2010 - End of Buyers Market I (2nd best out of 4 times to buy)
2012Q1 - End of Buyers Market II, Bottom of Market (Best time to buy)
2014Q4 - End of Sellers Market I (now starts the worst time to buy)
2017-2018 - End of Sellers II Market, Meltdown = Baby boomers selling, no new buyers (due to student loans), etc...

Key indicators:
Days on inventory, interest rates, unemployment

Advice for the Masses

It is rare that advice should be given to the masses.  Mint.com a great site, came out with top 10 financial rules to live by.  Listed below with caveat.

1) Save at least 10% of your income - Makes no mention to how much you make surely a person with 20k/yr salary will have a different strategy than someone making 80k a year.
2) Have at least three months of living expenses in an emergency fund. - Do you have kids or single makes a difference plus *why not front load your Roth IRA contributions in the year so you can take out if you need if... wait they tell you not to every withdraw out of a retirement account.

3) Get a life insurance policy worth at least 6 times your household income. - See #2, there could be other vehicles of protecting those left behind than traditional life insurance.

4) Use the 20/4/10 rule when buying a vehicle. - Ok wTF came up with this the car sales people?

5) Save 20 times your gross income for a comfortable retirement. - How old are you 25 or 55? What if you spend your money now like a drunken sailor?

6) Put down 20% on a house and don’t borrow more than two times your income. - This one is not too bad but its the same as #4.

7) Subtract your age from 100 to determine what percentage of your portfolio should be in stocks. - What if I don't plan to retire when I'm 70 and what if my health sucks that I will die when I'm 65?

8) Pay off highest interest rate debt first. - Yes but what if the asset with that dept was making positive cash flow?

9) Max the match on your 401(k). - Its free money yes but its often comes with hidden fees and the crappiest investment options.
10) Don’t take out more in student loans than you expect to make your first year on the job. - If everyone followed this then no one would go to school.

Also some thoughts about the web app Mint.com.  

Mint is not for everyone. It can take too much time. It focuses on Accounting before and typically there is little energy to focus on behavior.

Good Idea: The next step

Many people have good ideas but few have the ability to run with it and make it happen...

What is better than the lottery

Instead of playing the lottery get life insurance on your loved ones.  Your getting better odds and you will need it when you get it.

Quote

“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”

― Mark Twain

Passion Don't Follow It: Yes you heard that right!

I take it all back about dreams and passion... don't follow it.  Get good at something that has value: Steve jobs did not have  passion for computers but he was good at it. Don't make the jump until you have the skills to leverage.  Going after your dreams day one after graduation is like being a consultant from day one or being a total professions from day one... not going to f-ing happen and setting yourself up for failure.  The whole "follow your passions" has been out since the mid 1900s and every since then job satisfaction and happiness has been decreasing.

Please refer this video for additional information from Cal Newport, 40 minutes but totally worth it.

2013 a new year get out and don't follow you passion and get good at something.

Double standards in physical culture

Why do people criticize the person who asks for a side salad instead of fries or goes out for jog after the party?  The guy is just trying to take personal resposibility for their health and future well being.

Why are people with cancer and diabetics treated like random victims? Do we not realize there is an association between the sleep/diet/exercise choices we make NOW will affect us in the FUTURE?

It's Ok to be different Part II

Piggybacking on the words of Kathryn Schulz, we don't need to be right at everything. In elementary school, the kid who's paper was marked up by the teacher was thought as the dumb kid/the kid always making trouble/the douche who forgets their homework… so now today

we associate those who are wrong as extremely negative (or at the deepest personal level we denounce the person as a "fucking idiot") and therefore the best practice is to never make mistakes.

To apply this idea to a different topic lets think about those folks who were always correct... The straight A/workaholic/just freaking smart dude. Post college they tended to be doctors or lawyers but perhaps they themselves needed to take more chances and make mistakes? Maybe the path not taken would have produced a career platform that would have exponentially magnified the individual’s talents into a greater good for society... It is good to fail, hit the wall, and be directed in a different direction.

Like Lance Armstrong who only won the tour de France after he had cancer... the surviving & overcoming & risk taking acts as a catalyst for accomplishing great and extraordinary feats.

It's Ok To Be Different

No today's is not a motivational speech...

I would just like to point out that it advantageous to be different and think outside the box. In case you haven't noticed the average person is not doing that hot.

Doing the typical thing you work 9-5 or 5-9 for a capped salary building someones else's empire essentially trading your time for money, get laid off when times get tough, buy things that is advertized on mainstream media(ipad 1-2-3, iphone 1-2-3-4, lattes), become one of the 70% of people living paycheck to paycheck, buy the American dream home/cars that you will never be able to pay off and ultimately defer true happiness and freedom until you are living off medicare. Most importantly and in a higher level you are living a life void of freewill and of originality. Again don't compare yourself with other people, what they are/have has nothing to do with you.

What I am alluding to is a giant paradigm shift between the average person and revolutionary people who challenged the status quo and think for ourselves.

Henry Ford went outside the box to create the assembly line.
What if Edison just thought the gas lamp was about as good as it got?
What if the Wiki folks didn't work on that open-sourced encyclopedia (We would be using Encarta...YIKES!)?

"The world is full of nice, ordinary little people who live in nice, ordinary little houses on the ground. But didn’t you ever dream of a house up on a treetop?"
-Johann David Wyss Swiss family Robinson

"We can’t solve problems by using the same kind of thinking we used when we created them."
-Albert Einstein

"Have some balls and venture off the beaten path, and quit being a f-ing drone"
-A Wiseman

Mint: To Join or Not

Mint.com is a website that aggregates all you financial institutions and keeps track of balances and transactions. A similar competitor is Yodlee.com but they are all the same.

The biggest drawback people see is that if someone hacks your mint your screwed.

Personally: I have confidence that Mint is as secure as it can be and handles data with a high level of security btw is a spinoff from Intuit maker of Quicken and Turbotax. Stealing your identity can be done on many fronts such as your bank, your personal login from the bank, taking you physical mail or credit card, rid swiping, lots of ways. Nothing is 100% safe, in everything there are risks but Mint.com provides an addition safety net. Having all your financial info in one arena seems scary but your biggest and only foolproof method of ID theft is constant monitoring.

Ask yourself how frequent will you login and check every single one of your credit card and bank sites? Then ask your self how frequent will you check Mint.com your one stop shop?

If you check every single one of your credit card and bank sites constantly good for you... consider getting a life or making more money so you wouldn't even have to track your money. But, if your a normal person seriously consider using Mint.com. With Banks and credit cards if you find something funny happening in your account you just have to call them and they will fix it as long as you communicate in a timely matter 7-30 days.

In closure, I love Mint.com and check it on a weekly-bimonthly basis. It gives me peace of mind to double check transactions and I like simplicity and enjoy using the cool tools for entertainment value and it helps you achieve financial goals. It will never replace good old fashion Excel spreadsheets but is a great supplement.

Ditch the Big Bank and join a Credit Union

1- Laughable interest rates on savings/checking. And loan rates. Try Rewards Checking at CUs.
2- Due to the recent Credit Card Act of 2010 it is harder for big banks to make money so they are more aggressive in fees such as atm fees. The trend for charging for credit cards and checking accounts is coming. And it takes a smart person to decipher their fee structure.
3- They are for profit and that means the consumer always loses.


Counter Arguments...
1- ATMS? Big banks are Brick and Mortar establishments and everywhere but if your CU is part of a Credit Union Partnership like this one you can do whatever you need to do at any CU branch or ATM.

2- Banks do fail but you are insured up to $100,000. Big Banks are covered by the FDIC and CUs are covered by National Credit Union Administration NCUA. Both are pretty much the same. You only hear about people losing their money because they are idiots who keep more than 100k in their account.

3- CUs don't have that much money to spend on adds in Yankee Stadium or sexy iphone apps but they all have online banking which is all you need.

4- CU membership is restricted but not really. Most times to join you or a friend, or family, or just need to know how to google a zip code to join. I.E. Stanford's CU you just need to make a 10 dollar donation to the "friends of palo alto library fund". Do a little HW and you will get in the door.

ROI: Return on Investment

In business, a company can improve its self by improving capital and this is called a Capital Investment. Why don't we do this for ourselves. I propose a 1-5% of your annual income to go back into yourself for improvement or new experience. At Google they encourage and set aside time and resources for their employees to explore. The Google saying goes "you don't know what you like until you try it". Budget it how you want, monthly or quarterly but the money is like an AFE: Authority for Expenditure whereas you MUST spend it or lose it.

Good ideas consist of: Buying books, personal training, new running shoes for fitness, musically lessons, golf lessons, drawing lessons, museum pass.

Questionable ideas are: Vacations, massages, tanning, spa, clothing, new tv.

Additional Reading

Why doesnt everyone... #2 Deadly Sin Gluttony/Overspending

The "Most Typical Person" is a douche who has a cell phone with no bank account.

The average consumer owed more than $4,200 in credit card debt in 2010.

About third of all cardholders pay their balance in full each month.

Maybe this is why Eighty-six percent of “prestige/luxury” cars are bought by non-millionaires. And the most popular make amongst the nation's millionaires is Toyota. Source: Millionaire Next Door

Ahhhh... Stop using credit cards if you can't handle it. "Dude you can't afford it don't buy it."

And if you say I'm spending so I can get all these cash back/point rewards on my credit card, you deserve a swift kick in the butt.