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Archive for August, 2009

You're a frugal if....

August 30th, 2009 at 09:44 pm

While reading some financial stuff elsewhere, it occurred to me just how a frugal person can be so distinctly different from a non-frugal. Not in a "I'm better than you" sort of way (although I admit I do think frugality is a better way of living), but... I'm just musing how because we are different, I sometimes forget that not everyone is like us.

For example, I believe frugal people actually enjoy doing their budget. I know I do. But it's easy to forget that many people find it daunting, or at the very least boring.

Another example is that hunting bargains and even clipping coupons may scratch a certain itch that non-frugals may not possess. It gets us rubbing our hands together, perhaps even doing a victory dance, while non-frugals think we've fell off our rockers.

Yet another example is that non-frugals only find joy in spending I think. Therefore, saving and even investing is often times seen as a lamentable exercise in necessary evil rather than giving one warm, fuzzy vibes.

Last but not least, I think frugals might find all this to be "perfectly normal" while the rest of the world may think of us as odd or even extreme. For example, I think debt is generally a "bad thing", best to be avoided unless it can't be helped, or it somehow pays back even more (such as a cash-back credit card). Non-frugal people may think that having debt is as normal and American as apple pie and Fourth of July. Yuck.

That said, I don't consider myself as a natural frugal though. I think there are some people who just seem to have a knack for this, and therefore, didn't have to "train" to become frugal. I, on the other hand, had to be re-born and taught from scratch. But at least I'm on the path now eh? It's also heartening to know that anyone can learn to be frugal, even if they didn't start out that way.

So, do you think there are differences between frugals and non-frugals, and if so, what other distinctions do you think there are?

Aug 09 net worth

August 28th, 2009 at 05:45 am

It's that time of the month again. Big Grin

Currently, I have only four categories when working with net worth: Cash, 401(k), Rollover IRA, and Roth IRA. Thankfully, having so few and having them all being assets makes it both easy and a joy to work with.

I know that can't last, and that's why I am enjoying it while I still can. Big Grin

So, this month, I thought I was going to get hit by a raft of irregular expenses, but I was wrong. It's getting pushed back to September, so this month has been a surprisingly good month.

Well, this month's market performance has been literally flat, so the uptick is driven mostly by cash savings that, again, I thought was going to be used to pay for irregular expenses.

In any case, expenses are definitely coming up for the month of September and possibly October, so I think my "pretty months" for the year has probably come to an end.

$1K craze

August 26th, 2009 at 08:47 am

So how does this work anyways? You just list stuff that have costed you at least $1k?

If so, well, my list is pretty short I think.

My whole PC setup, including the monitor and home theater speakers is well, um ahem, it's closer to $2k actually. BUT, let me add that I had to build from scratch, and this time, it's with future upgrades in mind. So, should not cost that much into the near future.

My mattress is actually $1k. Yeah, believe it or not. I bought one of those premium ones that is suppose to last like 30 years, and after crunching some numbers, it actually came out to be the better value, and with a better quality bed! Assuming that it does last that long....

I guess my car and my college tuition bill if you want to count that. But both are paid off.

Annnnd, that's it!

Addition
Ok, so apparently I am not doing this right. The above is my post-divorce, frugal list. So, what you are seeing in this section would be my pre-divorce non-frugal list.

House - $170k
New station wagon - $17k
New Apple desktop - $3k
Three new Apple laptops - $4k
Two new PC desktop - $3k
New furniture for the house - $3k
SelectComfort air bed set - $2k
Various firearms - $3k

I'm sure there is more to this, but that's all I can think of right now. Does her ring count? Anyways, we sure loved computers back then, didn't we? I still do, and she probably does too. Yeah, it was interesting that I was with someone who liked computers perhaps as much if not more than I do. Equally surprising is how conservative I am today about computers, especially when you consider how much I like them.

One quick thing about the firearms. I've swapped them in and out over the years, and by the time we separated, I've sold it all and probably at a slight loss. So, yeah, I spent a lot on it, but... I recovered most of it as well.

Also noteworthy is that it was all acquired by going into debt! Yeah, pretty much all of it. However, everything in my first list was bought up front, paid in full with money I saved first.

Can market inefficiencies be exploited?

August 26th, 2009 at 07:42 am

Summary
This is kind of stock-trading talk, but it's also something that I think will interest serious investors as well.

Question: Can market inefficiencies be exploited?

Better question: Do I know anyone that can?

Even better question: Can *I* exploit it?

Short answer: I highly doubt it. Frown

That's the sad but short truth. Now, for those who are still interested, please read on.

Premise
Imagine a deceptively simple and seemingly "sure-fire" premise. You see something that is currently running for a very low price, what do you do? You buy it. You see something that is currently running for a very high price, what do you do? You sell or short it.

Buy low. Sell (or short) high. Simple right?

So, why are so many smart people having such a hard time with this seemingly simple concept?

The more I learn, the more I am realizing the following: Most people don't know where the lows and the highs are. And for that matter, we don't know if current lows could go lower, or if current highs could go higher.

At least, not I.

And when you think about it, most trading strategies have to do with covering the possibility of a trade going wrong. Risk mitigation. Or is that loss mitigation? There's a difference there.

But to answer my own second question, the only person who I can think of that can seem to beat the market is Warren Buffett. I even have a link in this blog, linking to a white paper that claims he isn't just lucky.

So what is he doing that makes him succeed where everyone else has failed? After all, everybody knows about value investing by now. A whole lot of smart people are practicing it. So, why not others? Why only Warren? I don't know.

Articles
If you're wondering what brought this up, consider this interview with

Text is Jeremy Grantham of GMO investing and Link is http://moneywatch.bnet.com/investing/article/jeremy-grantham-why-to-buy-stocks-now/277143/
Jeremy Grantham of GMO investing. When you read that article, you get the sense that he is indeed a pretty smart man and he talks a lot of sense. Now consider this rebuttal by
Text is Larry Swedroe of Buckingham Family Financial Services and Link is http://moneywatch.bnet.com/investing/blog/wise-investing/can-market-inefficiencies-be-exploited/498/?tag=col1;blog-river
Larry Swedroe of Buckingham Family Financial Services.

Granted the rebuttal itself is not without some criticism, but if Swedroe is correct, then why is Grantham himself isn't able to exploit the market based on that simple premise? Yes, the same premise as my own that I am hoping to exploit?

I think it's not so much that zigging when everybody is zagging isn't a bad idea. But rather, the problem is we really can't tell when the market is zigging or zagging at all. Even when the valuations seem so "obvious".

Well, either way, I am still not fully convinced that this is impossible. I mean, even if it is, I'd like to keep trying for now. But peering into others who are obviously smarter and more experienced than I am, and yet having just as much of a hard time with the same basic thesis I'm using, it does give one pause.

AT&T is diving me nuts

August 26th, 2009 at 07:10 am

I got my first bill with AT&T. I pay all my bills online. With AT&T, this shouldn't be a problem.

But it is.

In order to access my online account, I need either the last 4 digits of my social security # and my zip code, or my PIN number.

My social security # isn't listed in my account yet because this is my first time. I don't have PIN because I'm paperless (unless they plan on sending the first one which has not arrived yet).

I call up their support hotline. The automated voice message is buggy. Yes, a telecom giant with a buggy automated hotline! I got hung up three times. What in the world?

I finally manage to get through, and this poor lady is having a hard time routing me. And when it finally routes me through, the automated voice support tells me to go visit their website.

What the heck? And when I check online FAQs, it tells me to check the printed bill!

What kind of crazy operation is this? The DSL is great, but this is ridiculous! Seriously, I'm tempted to disconnect on general principle. And I WANT to pay them! This is insane.

Crazy trading quickies

August 25th, 2009 at 08:24 am

I know not everyone is interested in this stuff, but this is what's going through my head right now, and I'm always curious as to what some of you think about this. I'll also try not to ramble.

* India's affluence is shooting up, and so is their investment sector. I heard that some India's investment ETFs have quintupled. Crazy. And the only way to top that? I think there's still upside to it. So, how crazy am I for thinking this?

* The sugar commodity has had a huge run, no thanks to drought that has artificially driven up prices to all-time highs. Am I crazy for thinking I should short this?

* Speaking of shorting, I've never shorted anything in my life. And I'm thinking it's time that I at least learn how and add that to my tool box.

But of course, this also involves going into options trading, which I've generally avoided. Am I crazy for considering converting my Roth account into an Options account?

* Guess who's back?
Back again?
Bernanke.
Tell a friend.


Congrats on your second term!

* Finally, volatility continues to fall, and in fact, is headed towards early 2008 levels. I think that's a good sign, but it's not time to celebrate just yet, because if you put it in context, the entire 2008 was kind of abnormal.

Money need lovin' too

August 24th, 2009 at 08:30 am

I was hanging out with this particular friend of mine again. You know who. But you know what? He wasn't even remotely bothersome this time around. He really is a cool guy when we're by ourselves and he's doesn't get uptight about competing for women or something.

Anyways, he was talking about how he met this woman he is completely not attracted to, but she appears to be interested in him, and she also makes a lot of money.

Unfortunately, my friend is very financially-challenged. In fact, he's currently unemployed, living on student loans while he's back in school. Well, anyways, he was asking me if he should "go for it" for the sake of money.

Of course, you know how I feel about stuff like this, but I also don't believe in telling people how to live their lives. So instead, I asked him, "Well, what do you think she would want you to do in return for fondling her money?" ("Fondling her money" was his words in the question, not mine.) He shuddered and said, "Yeah, no, that ain't gonna work." Big Grin

I think the more interesting point here is that there's this running stereotype that only women like men with money, but it goes both ways. I think, in general, the more someone desires something that they themselves don't have, the more they are attracted to those who have it.

Anyway, he brought up about starting up a smoothie shop again. And he's starting to admit that he's worried about money. Very peculiar, you know, for someone who says that money is evil. Anyways, I don't think or at least remember him saying that he's actually worried about money before. Anyways, he basically came out and asked me if I would be interested in getting a business loan. He figures $70k or so should do it.

Um, do what?

Usually, we just day dream about stuff like this, or what to do with winning the lottery, or some other amusing topic, but hmm, I think he's actually serious this time. Seriously though? I don't want to go into debt, betting it all on a business plan that, so far, only involves "finding a good location" and "re-renovating". Especially in this recession. Seriously, wow, that's crazy.

But I didn't want to be rude and step on his dreams or anything. So, I basically told him that my credit is still bad right now, which was true.

Index index everywhere

August 22nd, 2009 at 01:13 pm

In keeping with the humorous joke that there is an index for everything, here's an interesting way to look at the differences in purchasing power.

Text is The Big Mac index and Link is http://www.economist.com/daily/chartgallery/displayStory.cfm?story_id=14288808
The Big Mac index

Edit: Wow, just found out that this index has been around since 1986! Interesting!

Useless money

August 21st, 2009 at 01:56 pm

Multiple posts today, but I can't resist sharing

Text is this picture and Link is http://www.investmentpostcards.com/wp-content/uploads/2008/12/3-dec-1.jpg
this picture. It really brings home the definition of useless paper money.

Staying frugal

August 21st, 2009 at 10:48 am

You know, there is a lot of articles out there on how to be frugal, but there doesn't seem to be as much talk about staying frugal. Like, why would anyone want to STAY frugal?

Well, it might sound like a crazy question, but if you think about it, that's the biggie isn't it? Because like most anything else in life, frugality only works best when you can stick with it.

So how does one STAY frugal? Um, I'm not sure! How about you, what do you think?

Well, I can tell you why I am still frugal, despite having been debt-free and with the net worth chugging along. The simple truth? Well, I'll tell you....

Fear.

Yeah, when it's all said and done, it basically comes down to that.... Because, look, we've all done the numbers on here, and we all know what it takes to achieve any sense of financial freedom.

And for most people, that number is actually pretty big. And I don't mean a fancy life either. Think about how much a house costs, and how much cars cost per year, and basically just trying to create a living for yourself.

And that's assuming that I will keep working without problems into the foreseeable future. Heaven forbid if I run into an accident that leaves me physically disabled or I become ill and am hospitalized for a long period of time.

And if I'm lucky? Maybe I'll even be able to work towards having passive income to replace my active income, which will eventually become necessary as I get closer towards retirement.

As you can imagine, once you know the true amount that is needed to achieve financial freedom... you can't put that genie back in the bottle.

So, even though I am doing fine right now, I am not so delusional as to think that I've got it made. Far from it. And that's why I am as focused as ever to maintain frugality and financial progress.

Some people might think I'm being overly-cautious, but I disagree. The best time to prepare for potential problems is when everything is fine and you can afford to, not when it's about to strike or is already upon you.

And if I'm wrong? Well, having a little bit too much money is the kind of problem I wouldn't mind having. Big Grin

Of course, running on pure fear isn't healthy, and I do enjoy the process as well. But anyways, now you know why I am still frugal, and still here. And now you'll also know why I'll never fall off the frugality bandwagon.

So, how about you? I'm really interested to know what keeps you frugal? How do YOU do it?

Turning point

August 20th, 2009 at 11:19 am

I am seeing this question pop up elsewhere, and since we also seem to have several new people, I thought it would be fun to ask again, "What made you turn frugal?"

And since I asked first, I guess I'll also answer my own question. My ex-wife and I were $330k in debt and our combined income at the time did not add up to more than $40k a year. Our monthly budget was so tight that, at the rate we were going, we were literally two months from eviction. I'm sure my ex would disagree, but I kid you not we were in very bad shape.

So yes, it was complete and utter fear that drove me to frugality. I tried to turn the ship around, but my ex somehow interpreted that as me not loving her or something, which eventually lead to my divorce that by now I'm sure the regulars here are tired of hearing. Big Grin

Of course, I'm still here, not out of fear anymore, but because it makes a whole lot of darn good sense. Yes, it still represents a peace of mind that I seek, but frugality is a critical component to any plans towards financial wellness.

Oh, and I am forever grateful to those who have helped me get to where I am today. I wouldn't have been here if it weren't for you guys. Thanks again, gang!

So, what about you? What was your turning point towards frugality?

What a difference a year makes

August 19th, 2009 at 12:43 pm

Stock-related, but more general speak.

Overall, I'm just so surprised at the turnaround in financial sentiment. Seriously, it's only been a year to a year and a half going from "frugality is icky" to "frugality is chic". Even teenagers are getting in on the simpler life. And that's a great thing.

However, there also seems to be a new kind of pessimism as well. A certain sense that the government or the economy or something has somehow betrayed them. And if they are wise and mature, they will also realize that we consumers are just as much to blame for our own actions.

Regardless of the finger pointing though, it seems much harder now to "sell" the idea of actually BUYING into the market for example. "Oh, look at how the market has failed us." Ugh. Whatever happened to the good old days of just trying to convince people to be more frugal? Big Grin

Ah well, despite my currently bearish outlook, I'm still going to keep buying into the market. In the end, there are still a lot of good companies out there that is still going for a pretty good price.

I could be wrong about the stock market of course, and end up losing a bunch of money. But I also think it's important to be able to see beyond what's right in front of our noses. There's great opportunities to be had!

The Nice Guy Paradox

August 18th, 2009 at 03:54 pm

Completely non-financially related, but a popular and controversial topic on the internet (at least amongst younger men).

Text is Here's the link, and it's a brisk and succint read. and Link is http://danielmiessler.com/writing/the_nice_guy_paradox/
Here's the link, and it's a brisk and succint read.

Now, do I agree with this? Not exactly. However, I am a guy, so it doesn't carry much weight in such discussion. Fortunately for me, since there are many women on here, and I'd be interested to hear what you think of it.

Thanks in advance!

Loan sharkin'

August 18th, 2009 at 08:57 am

A co-worker asked me if I had change earlier for the vending machine. I said I only had a little bit, and gave him what I had.

About an hour later, he came back saying he didn't need my change. However, he gave me a penny more than what I gave him. I told him that, but he said to just go ahead and keep it.

Hey, money's money and that still works out better than some of the stock trades I've made in the past. Big Grin

Expense ratios matter

August 17th, 2009 at 09:30 am

So, I've been tinkering with this

Text is retirement calculator and Link is http://www.moneychimp.com/articles/randomness/retirement_odds.htm
retirement calculator. I changed the years to 30, but left everything else alone. The good news is that I have 100% chance of success! Great!

However, if I up the expense ratio to 1%, my percentages falls down to 96%, and at 2% ER, it my chances fall down some more to 91%.

Sure, it's only an arbitrary retirement calculator, but it's enough to show that your expense ratio do make a difference!