Category Archives: Finance

Are We Financial Serfs?

by

Back in the middle ages and medieval times, most of the feudal European population (roughly 90% or 95%) were serfs of some sort or another. Serfs is an aggregate class name for a lot of smaller classifications, like pheasants and even slaves. Life was different back then, and financial interest of any sort was outlawed by the church, so the magic of compound interest didn’t exist so opportunities to grow money were constricted. Without a way to invest money, either you had it in a container hidden in your one room house or is was collected as part of taxes that your superior took.

So how did the serfs make money? Their lords didn’t pay them money, although the nobles did let the serfs use the land that the nobles owned… In fact, the nobles mainly took their stuff like an ant sips the sweat off of an aphid bug. The nobles let the serfs keep some of the food to survive on, and some were even able to sell their food to merchants (the very small middle class back then, less than 9%) for money. So some of the serfs had money, but without a way to make it grow, they were still very limited.

Serfdom

Now the kicker is that although we have more opportunities since interest isn’t illegal anymore, wealth distribution isn’t really that much different from what it was like in the old days, sort of. I can imagine the net worth of individuals back then being practically flat until about the 95% of the population. Then at the 95% of the population line, the line slopes up dramatically, probably much like the wealth line does for the 1% vs the .01% today.

The difference is that today we own land and have our own houses, so this means that the wealth line is much more gentle slope than the dramatic rise of the middle ages. Equity in houses, not matter how many renters claim otherwise enables the bulk of us to have at least a little wealth!

So are we financial serfs? I don’t think so, but we’re still not that much better off except for the equity in our houses (at least for the majority of us). I think that a big part of our problem is that we aren’t raised financially savvy and shy away from investments of the financial sorts.

Bests,

MR

Financial Year End Strategy

by

Well it’s almost the conclusion of a long, stressful year and now is the time for me to start on my “year end financial strategy and actions”.

This is the optimal time time of the year (mid December) that I find works for me and my financial year-end strategy and for starting my financial strategy for next year.  By starting to close my financial year end work now, I’m better able to plan my strategy and actions for financially attacking next year.  The idea is to wrap up all of my financial loose-ends for the current year and to place a clean setting for next year’s activities.

So what kind of Year End Financial Planning do I do?

Father Time

Closing Work for My Financial Year End

  1. My first step is to sell my stock losses in my regular brokerage account.  I try to offset as much of the capital gains and other incomes that I have realized so that my tax consequence is minimized as much as possible.  This is a tough one this year, because it might be better to wait until next year when the dividend tax rates are higher, to cash out of these losses (if you have any).  I have side income to take the losses against, so I’m better off taking the losses this year since I didn’t make any estimated payments in advance.  It is important to sell these losses now because it is the settling date of the actually stock trade which is important for tax purposes, and that can take a few days.
  2. Retirement Rebalancing (mostly my 401k) – I don’t always rebalance my portfolio at year end, but with the fiscal cliff coming up quickly, I’m considering the pros and cons of rebalancing now.
  3. I like to pay any bills outstanding online so that I start the new year as stress free as possible.  This enables me to drift a bit at the beginning of the year.  I don’t why, but I like to start the new year this way.
  4. Medical expenses need to be addressed if possible.  Actually, this is my downfall, my son had a serious wound earlier in the year, and if I was thinking better financially, I should have lumped in a lot of medical work that needed done, but since I was sick (vertigo), my mind wasn’t all there.  Kind of ironic actually, when I need the work done and it makes the most financial sense, my mind wasn’t working at that level so I missed the cost saving opportunity.
  5. Tax planning.  Yep, now is the time to think about where I could have improved my tax strategy for this past year, and to make a plan to improve on it next year.

I know that working on your financial year end work seems like it would totally suck, but actually think of it as a positive activity.  Doing it now enables you to create a plan for success instead of letting life give you want it wants.  Of course, even the best thought-out plans may vary from the goal, but not planning at all is the worst plan!

Happy Holidays,

Don

 

Smart People Are Not Always Financially Savvy People

by

Smart people don’t always makes the best financial decisions.  Sometimes smart people are not always financially savvy people!  I’m going to illustrate a few stories below of my personal experiences of such people that I respect that you would think are financially clever, but their past history proves otherwise.

As I’ve mentioned in the past, I use to work in the  construction industry during my college days in the summer.  It was good money and actually fun but hard work.  During many a summer, I would work with a John.  This is the guy that I mentioned previously in the article called “Frugally Saving Money By Taking Advantage of an Unusual Opportunity“, in the article I talk about how he threw a deer in the back of his truck that was roadkill, and put in in a freezer at home (after he dressed it…).  Obviously, he was clever and didn’t miss that opportunity that was presented to him.

Plastic Penny

Plastic Penny

Well, the same person had this tendency to go to lunch and have a few beers bought at at bars (along with food to of course).  I was always amazed at how much the bill would be for this (what I considered) huge expenditure for lunch.  Another splurge would be that ever year he’d by the most fancy truck around.  With each year’s truck getting nicer and nicer, to a poor college age student (me), it was mind-boggling!

Now at the same time, every time he would find change on the ground he’d pick it up!  The dichotomy of his financial behavior always had me guessing.  He was a very “fun to be around” person, but also kind of tough.  The other constructions workers would follow the same patterns and the head construction guy.  Each guying newer trucks every other year, and buying the same meals at lunch.  Now a lot of it had to do with the respect of the head guy, but it was a costly respect, at least in my option.

I thoroughly enjoyed my experiences with John the head construction guy at the construction company that I worked at!

My next story is a bit different.  She was an extremely frugal woman and did a great job of saving money, but I don’t think she understood the effects of either inflation nor the principles of compound interest.  While she would look for the best bargains at multiple stores for grocery items, she never accounted for her traveling expenses.  Instead of investing her money in mutual funds, she would hid her money at home, and I believe even under her mattress (only a few thousand under the mattress though).  Some times if you had a keen eye, you’d see the corner of a dollar bill sticking out of a hiding place.

While she was a great saver, and definitely had some money, it will never be as much as she could have had is she had invested that money in money making assets and investments.  She definitely had part of the equation down, and should have more money in the long run than John “the head construction guy”, but she will never have as much as she could have had if she made her money work harder be investing that money in safe investments.

Both individual above, while not college education are very smart people.  If you met them, it’s pretty obvious, but without understanding basic financial principle they both will never have as much as they could have had if they had a basic financial education (or read pf bloggers).

I hope you found my stories interesting, if you has any story you’d like to share in the comments, please do!

Bests,

Don

 

Are Laptops and Smart Devices Worth It?

by

By now, if you read my site, you know that I’m about acquiring assets that make money!  But one grey area that I think it worth considering is electronics!  My question is:  Are laptops and smart devices money losers?

In my particular case, I own a laptop that has enabled me to do work in places that I wouldn’t have though that it would be possible!  For example, I was able to crank out a few posts at my local drive-in!  During the movie “Ice Age something”, I was able to crank out articles while the family enjoyed the movie!  Normally, that would be a waste of my time, but with my handy laptop, I was able to pretty much ignore the movie and get my work done!  Actually, my laptop has made me both a more versatile and mobile person!  I’ve written many an article at libraries, coffee shops and while being inconvenienced while waiting from something (like doctor visits).

Apple iPhone

Smart devices make it possible

I find it very refreshing that I’m productive while at these locations (especially the doctor’s office).  Time is valuable, so why waste it!

So in my case, I think my laptop has more than paid for itself, and even though it will be obsolete in a few years, I think it was definitely worth the cost!  I’m very satisfied with my purchase.

Now onto smart phones…  I currently don’t have one (other than the one provided by work), but they are probably similar to my laptop.  In fact, I’m positive that I would use my phone for tweeting and other forms of socialization!  That said, I sure I wouldn’t be able to do the in-depth type of work I can do with my laptop, so I’m not 100% sure that a cell phone would be worth the costs (especially the monthly charge).  One could make the case that it would be cheaper to buy a smart device and use a wireless router for talking at home or common hot points.  Then buy a cheap phone for actually talking (or IMing).

Another problem about smart phones is that the technology is obsolete much more quickly than my laptop.  It seems like smart phones have a life span of about 1.5 years, and they cost as much as my laptop!  Still I see that they can have value, but not near as much as my laptop does!

Do you think that my justification is flawed?  Are they making you money or wasting your time?

Bests,

Don