CCMD meeting report

Here is a report of the CCMD meeting I attended last night.  This report will appear in the January 19, 2011, edition of the Greenhorn Valley View.

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At the regular meeting of the Board of Directors of the Colorado City Metropolitan District, held on January 11, 2011, the board passed Resolution 1-2011, designating posting places within the district and county.  By law, all public boards and committees must give public notice of their meetings.  The Colorado City Metropolitan District will post official notices of all meetings in 2011 at the office of the Pueblo County Clerk and Recorder, at the CCMD Administration Building, at the Rec Center in Colorado City, at the Post Office in Colorado City, and on the CCMD website at http://www.coloradocitymetro.us/

Also at the meeting, the board rescinded its lease of the Community Center to R&L Airgun Supply.  The board had previously approved the lease to R&L, but since that time, R&L has discovered that it is unable to move into the facility due to zoning restrictions. (http://www.rlairgunsupply.com/)

The board discussed reinstating the Golf Course Advisory Board.  The board needs this committee of golf course advocates to make suggestions for improvements to the golf course, run events to raise funds for the golf course, suggest policies and fees, and volunteer time for getting things done at the golf course.  The board is considering starting up the Golf Course Advisory Board with representative members from the different golf associations, and one at-large member.

The next meeting of the CCMD Board of Directors will be at 6:00pm, on January 25, 2011, at the CCMD Administration Building.

newspapers

 

the Wall Street Journal

Newspaper after newspaper is closing, is going through bankruptcy, or is for sale.  Newspapers are losing money like mad.  Experts estimate newspapers won’t be around much longer.  The prognosis is grim.

So what are people like me going to do?

One of the funnest things in the world is to sit at the table with breakfast, coffee, and the newspaper.  I scan every headline, skim many articles, and thoroughly read the handful of articles I’m interested in.

Newspapers are better than TV news because more thought has to go into preparing the printed article than the news bite.  Also, more thought goes into digesting them.

Newspapers are better than internet news sites because they condense the news into manageable chunks.  You can look up any news story on the internet and find thousands, or maybe millions, of articles on that subject.  It’s too much to wade through.

I can feel the texture of the paper.  I can see the paper; it’s a tangible object.  I can smell the pulp and ink.  I can hear it crinkling in my hand.

no, really, I’m a professional

Congratulate me, I am now a paid writer.  Yesterday I got my first check for writing the column in the Greenhorn Valley View.  (You do know I write a column, right?  Check it out at: http://moneycolumn.wordpress.com/)

As paychecks go, I’ve had bigger.  But it’s actually kind of fun to look at.   I’m staring at it right now wondering if I should frame it or take the family out for pizza.

moneycolumn

I’ve decided to move all my newspaper columns over to a new blog: http://moneycolumn.wordpress.com/

This week’s column is already posted there. If you go there and subscribe to the feed, you’ll be able to read the column every week, for free, without ever visiting the blog or the newspaper’s website again.

This blog (https://weiszguy.wordpress.com/) will remain as a bucket for my brain puking. I’ll probably talk about a whole gamut of topics: personal finance, productivity, homeschooling, things that strike me as really odd or really interesting. You will never find lolcats on this blog. I have some dignity.

invest or prepay?

Invest or prepay your mortgage?  If you have a little extra money, would it be better to invest that money or make extra payments on your mortgage?  It is an age-old question, one that has been asked by people for hundreds, if not thousands, of years.  But in all that time nobody has been able to come up with the answer.  The reason this is such a difficult question is because the answer depends on so much more than math.

If we considered only the math, we would be tempted to invest all our money and hold onto the mortgage as long as possible.  If you have a mortgage at 6%, you would effectively earn 6% if you made extra payments.  But consider that the stock market has returned an average of 10% per year for the past seventy years.  Clearly, making 10% is better than making 6%.

But maybe it’s not so clear.  Do you know how much the stock market will return this year?  Will it be 10%?  Probably not.  It could be anywhere from -20% to 20%, which is an awful big swing.  Your mortgage, on the other hand, is guaranteed to return 6%, if that’s your rate.  Which one causes you to sleep better?  You also need to consider your gut.  Which would make you feel better: owning a big pile of money, or NOT owning a big pile of debt?

If you are like me, having a big pile of money may be too much temptation to bear.  If you have a big pile of money, and you spend it, your return wasn’t so great after all.  But a mortgage locks up any extra money you send in.  The only way to get that money back out is with a messy and expensive second mortgage.  And the only people with second mortgages are those who have forgotten how painful the first one was!

In the end, it’s a deeply personal decision.  Your situation is very different from your neighbor’s, and your decision needs to be tailored for your situation.  But if you consider the math and your gut, and be disciplined with whatever decision you make, it will be hard to go wrong in the end.

This column originally appeared in the February 6, 2008, edition of the Greenhorn Valley View.

what’s in your wallet?

I went on an archaeological dig recently – through my wallet.  I got out my toothbrush and dental pick and began sifting through the hardened layers of sediment.  I discovered things I haven’t see in a very long time.  And I discovered a little about myself.

Apparently, I like to stuff things into my wallet.  I must be hoping they’ll magically – what?  What am I hoping they’ll magically do?  Disappear?  File themselves into folders for easy searching?  Find a mate and multiply?  Whatever I was hoping would happen with all that stuff, it hasn’t.  Well, maybe the multiply part.  Where does all this junk come from anyway?

I have credit cards, debit cards, grocery store rewards cards, a book store rewards card, library cards, and gas station cards.  I have six frequent diner cards – for restaurants I haven’t been to in years.  I have pictures of my kids – from when they were babies.  I’ve got receipts from McDonald’s from before Christmas; a receipt for a bottle of soda; a receipt for a handful of screws from the hardware store.

I didn’t find any pictures of dead presidents in my wallet.  I’d like the presidents to take up permanent residency there, yet all the receipts seem to imply the presidents are wandering nomads, looking for a place to call home, but not content to dwell long in my back pocket.  It’s too bad, too.  With a little spring cleaning and a fresh coat of paint, my wallet would make a lovely home.  They could have parties, invite their friends, maybe some of them could stay a while.  Maybe big brother Ben would stop in and say hi.

But no, there’s too much crud.  Too much dust, parched paper, and other archaeological detritus for men of their caliber.  I guess I’ll have to be content digging through the evidence of the past.

This post originally appeared in the January 27, 2008, edition of the Greenhorn Valley View.

recession

Haven’t you heard?  There’s a recession going on.  Well, technically, it’s still a little early to call it a recession.  To officially be called a recession, our Gross Domestic Product must decline for two successive quarters.  But that’s not much comfort to the people today who are worried about job loss, declining sales, or even business failure.  If recession is on your radar, what can you do prepare?  How do you plan to withstand it’s impact?

Obviously, if you are worried about your income being reduced for any reason, you should immediately put yourself on a financial diet.  Spend as little as you possibly can.  Try to build up a short term cache of cash you can use to even out dips in your income stream.  With any luck, the recession will be over before your cache runs dry.

You should also dust off your networking skills.  What industries seem to be unaffected by the present downturn?  Who do you know in those industries?  Give ’em a buzz.  The worst that can happen is you’ll get reacquainted with an old friend.  And don’t forget to be on the lookout for other people who are affected by the recession.  If there is any way you can help somebody else, their gratitude may be invaluable down the road.

Is there any way to take advantage of a recession?  If you aren’t worried about any sort of income loss, you might be in a position to make a little money.  You’ve heard the saying, “Buy low, sell high,” right?  Stock markets around the globe suffered huge losses this week, with drops as high as 10% in just a few days.  If you believe, as I do, that the markets are fundamentally sound, then this may be a great time to buy.  If you do buy in now, just be prepared for further declines before the climb back up.

So stow the sails, batten the hatches, and keep your eyes on the horizon.  I’ll see you on the other side.

This article originally appeared in the  January 23, 2008, edition of the Greenhorn Valley View.

volutary deprivity

I know something about you.  I know you don’t have enough money left at the end of the month.  There are things you wish you could do, but you don’t have the funds to do them.  If you had just a bit more money, everything would be fine.  This is true whoever you are, whatever your income.

Think about it.  No matter how much money you make, it isn’t enough.  If you make $20,000 a year, don’t you wish you made $30,000?  If you make $200,000 a year, don’t you wish you made $300,000?  This is a near-universal experience.  But rather than whine and moan about it, I wonder if there’s a way we can use this to our advantage?

Let’s say you’d like to be saving 10% of your income, but you haven’t started yet because you don’t know how you’d get by without that money.  Things are so tight right now – there’s no possible way you could survive on less.  But we just established that ALL income levels feel inadequate.  If you earned 10% less than you earned right now, would that really feel any different than what you make now?  Yes, your checkbook would notice, but would you feel any different?  My guess is you’d only notice the difference for a week or two.

Try this experiment.  The next time you get a paycheck, put 10% away somewhere – anywhere, under the mattress if you want – it doesn’t matter.  Then try to make the rest last until your next paycheck.  If you’re like me, just the thought of 10% less scares you to death, but I bet you’ll make it to the next check without much difficulty.  If you’re successful, you’ll be living on less, AND you’ll be saving up for a rainy day.  And you’re doing it EVEN THOUGH you don’t have enough!

This post originally appeared in the January 16, 2008, edition of the Greenhorn Valley View.

the ultimate gift

There are certain character traits that are extremely important in life.  Traits like a strong work ethic, understanding the value of a dollar, and the importance of generosity and hospitality, for instance.  These qualities are far more important than skills like the ability to understand math or the ability to start a new business.  People who are nearing the end of their lives don’t want to pass on the knowledge of starting businesses, they want to pass on the knowledge of being a better human.  Skills are important, of course.  They are the tools that can help us reach our goals.  It’s just that our goals should be more others-oriented than self-oriented.  The goal should be to make the world a better place, not to start a business, but starting a business may be a valid method of achieving the goal.

I just read The Ultimate Gift, by Jim Stovall.  In it, a wealthy cattle-baron has just passed away and in his will he lays out a plan of action for developing strong character qualities in his grand-nephew.  The nephew isn’t excited about the plan, but as the book progresses he becomes a better person as he submits himself to his uncle’s plan.  The uncle has the nephew perform twelve month-long tasks, each task teaching him a new, and highly valuable, quality.  The nephew learns lessons about work, money, friends, and the thirst for knowledge, to name a few.  By the end of the year, the nephew has become a new person, having been transformed by the hard lessons he has learned.  Because he has learned all these lessons, he earns the ultimate gift, control of a $1 billion charitable trust.

Here’s the thing, I don’t have a $1 billion trust to leave my progeny.  And even if I did, I’m a long way from leaving it to them in a will.  But I desperately desire my offspring to understand and internalize all these lessons just like the nephew in the book.  How do I instill a strong work ethic in my children?  How do I get them to crave spending time with people and giving themselves away?  How do I instill any of these desirable character traits?

choosing stocks

There are thousands of publicly traded companies.  If you want to get into stock market investing, or if you’re looking to improve your performance in the stock market, how do you know which stocks to buy?  Any one stock has dozens of indicators that each tell you a little piece of how that company is doing.  Over the decades many theories of investing have been put forward in an attempt to make sense of all the stock market data that is available.  One particular theory that makes a lot of sense to me is value investing, which looks for stocks that are currently trading for less than the value they should have.

The Little Book that Beats the Market, by Joel Greenblatt, attempts to make value investing extremely easy by turning certain measures of a stock’s performance into a formula.  The book lays out the formula by which any investor can find good companies that are priced low.  In order to find good companies, we look at the stock’s earnings.  The formula lists all stocks in order of earnings, assigning a numerical rank to each one.  In order to find companies that are priced low, we look at a stock’s price-to-earnings ratio.  A lower ratio indicates a better bargain.  The formula again lists all stocks in order of price-to-earnings ratio, assigning a numerical rank to each one.  The formula then adds the two rankings of all the stocks and lists them in a master ranking.  Those with the lowest ranking are the best companies at the lowest price.

There are of course, many, many other measures of a stock’s performance.  And companies with star power, like Microsoft or Coca-Cola, won’t be found on this list.  But sometimes having too many things to look at prevents us from taking any action at all, and narrowing our field down to earnings and price-to-earnings ratio can help to focus on the things that really matter.

This article originally appeared in the December 26, 2007 edition of the Greenhorn Valley View.

unexpected debt

This year we had an unexpected debt come up: $2600.  Other than mortgage debt, we don’t have any other debt, so this is a large amount for us.  We paid it off in seven months, which is good.  Really good, in fact.  I’m pretty proud of the way we pulled our money together to get this debt paid off quickly and with as little interest charges as possible.

Nevertheless, a couple of questions are haunting me.

What were we going to do with that money if we hadn’t incurred the debt?  I’m sad to say, probably nothing.  We probably would have lost that money through the cracks.  Cracks like extra meals out, more expensive meals in, extra do-dads and trinkets for the kids or ourselves.  None of which would have any meaning or purpose.  (Contrary to what you might think if you observed my dining habits, I don’t really think eating out enhances our lives.)

If we hadn’t incurred the debt, and we didn’t lose the money through the cracks either, what could we have done with the money?  I think we could have done a lot.  We could have taken a fairly nice vacation in the mountains, saved for the kids’ educations, made some repairs to the house or car we’ve been meaning to get to, or done something meaningful for charity.  I think the possible meaningful uses for that kind of money are legion.

Here’s the million dollar question.  How many $2600 blocks of cash do we regularly throw away?  And by extension, how many great and meaningful things are we not doing because we throw that money away?  As our experience paying off the debt shows, it really isn’t that hard to come up with that kind of money.  We weren’t hurting because of the debt.  But I think we may be hurting ourselves by not being more deliberate with our money.  This year, I’m going to look for another $2600 in our spending, and redirect it to something I can be proud of.

This post originally appeared in the December 19, 2007, edition of the Greenhorn Valley View.

how generous should you be?

A question came to me while shaving today (questions have a way of doing that).  To what extent should we depend on others, to what extent should we be self-sufficient, and to what extent should we be helping others?

Depending on others for help is a virtue.  It teaches you not to place your hope in your own strength.  It teaches you that we are all connected and we all share one destiny (in this life, anyway).  But there’s also something unsatisfying and unsettling about leeching other people’s resources.  If they weren’t using that money for you, they could use it for something else.

Providing for yourself and your family is a virtue.  A primal urge for a lot of teenagers (and 20 somethings, and 30 somethings) is to cut the apron strings that tie them to their parents.  They want to be independent, to provide for themselves.  Society sees independence as a good thing, because then somebody else won’t have to provide for you.  The danger with self-sufficiency is forgetfulness.  It will be very easy for you to forget where you came from and that there are others who have not yet come as far as you have.

Helping out others in need is a virtue.  If you want to feel warmer this winter without turning up the thermostat, just give away a bunch of stuff to somebody who needs it.  They will be grateful, perhaps being able to do things they wouldn’t have done without your help, and you will get that feeling of nobility that comes from doing good without the hope of reward.  The downside of helping out others is arrogance.  You, in your beneficent magnificence, have condescended to provide assistance to those poor saps who are too stupid to do it for themselves.  This perspective is perhaps the most insidious of them all, so watch out for it.

Where are you on the spectrum?  Do you like where you are, or do you wish you were somewhere else?  Where is the best place to be, and how can you get there?

This post originally appeared in the December 12, 2007, edition of the Greenhorn Valley View.

envelopes of cash

What would you do if someone handed you cash in an envelope? Would you laugh? Would you stare, dumbfounded, in disbelief? Would you ask for a little of what they’ve been drinking?

What would you do if they told you you had to use that money to help somebody else? Would you keep the money for yourself? Would you give it to someone in need? Would you try to grow the money so you had more to help people with?

A church in the Greenhorn Valley pulled a stunt like this last Sunday. Table Mountain Church gave each family an envelope with cash in it, and that cash is to be used to bless somebody else. That’s it. Those are the only instructions. The possibilities are endless, of course. Some might buy hats and mittens for children without any. Some might pre-pay the next ten customers down at the coffee shop. Some might bring meals to those too sick to cook for themselves.

I’ve heard talk of paying someone else’s utilities, of taking a neighbor out to eat, of buying footballs and Barbies.

You might be wondering, as I was at first, if the church has lost its marbles. Giving money away! Are they crazy? They’ll never see that money again. Money that could be used for “ministry” expenses is gone, out the door. Then, of course, some church-goers may be less than ethical and just keep the money for themselves. Now who is blessed? Not the church, and not a needy neighbor, either.

It turns out Table Mountain Church doesn’t want that money back. Their goal is two-fold: to be a blessing to the community by giving themselves away, and to teach people the joy of giving, so that they might continue to give. So be on the lookout for random acts of kindness in the community this week. Please send me any stories you hear of, I’d love to collect a big pile of these stories, and maybe publish a few.

This article originally appeared in the December 5, 2007, edition of the Greenhorn Valley View.

diversification

Sorry I’m a little late with this!  This is my most recent column, which was in last week’s paper.

Diversification is a method of spreading out your investment risk. Most people understand the concept of diversification, even if they’re unfamiliar with the word. Diversification means not putting all your eggs in one basket.

Let’s say you’ve found a company whose stock you’d like to buy. You load up on as much stock as you can, but in spite of your thorough research, the price of a share sinks dramatically, and you lose most of your investment. The risk of loss is one of the greatest risks in investing, but diversification allows us to limit our exposure to loss. Now let’s assume you have found ten companies you would like to buy. You buy as many shares as you can, but this time you buy an equal amount of the ten different companies. If one of those companies goes bad, you’ve only lost that one small slice of your investment pie. And if your other shares have gone up, they may make up for any loss.

There are many ways to diversify. You can diversify across asset classes. This would mean buying shares of large companies and small companies; buying shares of companies that pay a dividend and companies that don’t; buying shares of companies in different industries; and even buying shares of companies in different countries.

You can also diversify across security type. Most investors have some amount of stocks and some amount of bonds, for example. Others invest in real estate and precious metals. Some even include more exotic investments, like art, old cars, or foreign currencies. If any one of these investments should lose money, it’s likely that another investment is making money.

While diversification doesn’t guarantee positive investment results, it does lower the risk of loss. In short, don’t put all your eggs in one basket. Diversify.

This article originally appeared in the November 28, 2007, edition of the Greenhorn Valley View.

beginning investing, part 2

Before we can decide if we want to invest in stocks, bonds, and mutual funds, we need to know what they are.  Stock is simply ownership of a company.  A company might divide its ownership up into one million little pieces, or shares, and then trade those shares on the open market.  If you own one of these shares, you own a little piece of that company, and are entitled to your share of the privileges of ownership.  When the company announces higher-than-expected earnings, it may divide up those earnings among its owners.  And because you own a share of the company, you’ll get a share of the profits.  When the company announces a new product, the price of your share may go up.  You could sell your share and make a little profit, or you could hold on to it and hope it goes up ever more.  Of course, it could go down, too, and this is the danger with stock market investing.

While stocks represent the ownership in the company, bonds represent the debt of the company.  When a company wants to borrow money, it might issue a bond, which is simply a promise to borrow money and repay it at a later date, with small interest payments along the way.  If you own a bond, you’ve loaned the company some money, and they will make payments to you – the same way you make payments on your loans.  One danger with bonds is that the company could default on its debt and leave you holding the bag.

Since there are so many different companies offering their stocks and bonds to the public, and since there are dangers inherent in this kind of investing, how do you know which specific stocks and bonds you should invest in?  Wouldn’t it be better to own a basket full of different stocks and bonds, so that if something bad happened to one company, you’d still have a pretty full basket?  That’s the idea behind mutual funds.  A mutual fund is a giant basket containing dozens or even hundreds of different stocks and bonds.  Owning a share of a mutual fund is much like owning a share of a company, when the stocks and bonds in that fund do well, you get a share of the profits.  By yourself, you might never be able to invest in so many different companies, but when you pool your money with thousands of other investors, you can own great positions in many companies.

This post originally appeared in the November 21, 2007, edition of the Greenhorn Valley View.

beginning investing, part 1

Hopefully, if you’ve been saving long, you’re starting to build up a tidy little sum in your savings account.  Before too long you’re going to wonder what to do with all that cash.  You know there are investment options available, but you’ve also heard that some people have lost their shirts with their investments.  Should you get involved?  Maybe it would be best to stay out?  What, exactly, can you do with a little extra money, and what are the risks?

You could continue to what you’ve always done, i.e., leave the money in your savings account.  This is possibly the safest option, since all bank deposits are insured.  Even if your bank should fail (as mine recently did), your money would still be safe (up to $100,000).  The downside of this strategy is that you’ll be earning fairly low interest rates.  My new bank is currently paying 4.2% on a money market savings account.  While that’s pretty good for a savings account, it’s only a tiny bit above the inflation rate, which means it would take an excruciatingly long time to grow your nest egg.  This type of savings account would be a great place to keep your auto insurance premium, for example, if it was due three months from now.

A bank Certificate of Deposit (CD) is an option with an attractive feature – it earns a higher rate than a savings account.  My bank is currently paying 4.8% for a six month CD, and this money is also fully insured.  The downside is you have to tie up your money for six months.  If you need this money before the six months are up, you’ll have to pay a fee to get the money out.  Because of this limitation, CD’s are great places to keep money you don’t need right away, but will definitely need in the near future, like the money you’re saving for your vacation next summer.

But what about stocks, bonds, and mutual funds, that’s where the big money is made, right?  Yes, but big money can be lost here as well.  These types of high-octane investments can be thrilling and depressing, sometimes all in the same day.  Tune in next week when we discuss the advantages and disadvantages of each.

This post was previously published in the November 14, 2007, edition of the Greenhorn Valley View.

gender-based advice

I’ve been thinking a little about how financial advice differs based on the target audience.  Men’s and women’s magazines, for example, have very different types of advice between their pages.  A typical financial column in a women’s magazine may be titled, “10 Reasons Why You Need an Emergency Fund,” and a typical column in a men’s magazine might be called, “10 Hot Tech Funds You Need to Invest in NOW!”  Why the difference in advice?  Why do they assume women don’t know enough to have even the basics taken care of?  Why do they assume men are only out there to chase returns?

Of course, there are inherent gender differences.  And there is no reason to deny or ignore them in a column about money.  I think it’s safe to admit that women tend to be more concerned with safety of principle than men.  They will take steps to ensure their money will be there when they need it.  On the other hand, men tend to be more risky than women.  They will take steps to ensure their money grows.

But money is gender neutral.  Interest compounds at a known rate, completely blind to the gender of its owner.  And all people, regardless of gender, should have an emergency fund and be investing for the future.  Both safety and growth are necessary if the goal is to have more money later than you have now.

Advice on safety is only one small part of the advice women need.  And usually, safety is the part they already understand very well.  Likewise, few men need to be advised to take more risk with their portfolios.  It’s in our blood.  What we all need, however, is a little more balance.  Being safe is silly if you actually lose ground to inflation.  And being risky is equally as silly, if you lose your principle to dreams of wealth.

So when you come across a guru wanting to tell you what to do with your money, pay special attention to what isn’t being said.  It may be the advice you need the most.

This column originally appeared in the October 24, 2007, edition of the Greenhorn Valley View.

time value of money

This is the column I wrote for the October 17, 2007 edition of the Greenhorn Valley View.

You’ve often heard that you should save your money rather than spend it, because you’re going to need that money down the road.  You also know that when you invest money it will grow, because of the interest, dividends, or capital gains.  But did you ever wonder exactly how big your investment could get?  If you have a long period of time, and can earn a decent return, your money could grow significantly.

For example, I’m 30 years away from retirement (at least).  If I can earn 10% on my money over that time, I can turn a small amount today into a huge amount then.  I could take $10 right now and go buy a cheeseburger and a coke.  If I did, I would not just be taking $10 out of my wallet, I would be taking $174.49 away from my future self.  Now that’s an expensive cheeseburger!  You can figure out time value of money problems like this using a business calculator, or you can find several good calculators on the Internet, and if that fails, you can find a special spreadsheet on my blog that figures this out for you.

Some more examples:

Instead of spending $4 on a latte, I could have $69.80 at retirement.

Instead of spending $50 on an XBox game, I could have $872.47 at retirement.

Instead of spending $399 on a new iPhone, I could have $6962.31 at retirement.  And that doesn’t count the service plan for the iPhone.

Instead of spending $2000 on a vacation, I could have $34,898.80 at retirement.

Obviously, you won’t want to go completely spartan and never spend any money on anything.  Nevertheless, understanding how much money you’re taking away from your future self could easily sway your purchasing decisions.

I wanted to put the actual spreadsheet up here, but WordPress won’t let me upload a spreadsheet.  So here’s an image taken from the spreadsheet.  If you’d like the original spreadsheet, just email me.

4 reasons why you should be generous

Generosity is a virtue that is largely undervalued by society as a whole. There are spiritual reasons for being generous, of course, which you can discover at your favorite house of worship. Today, however, I’d like to focus on the many practical benefits of being generous.

Being generous will free you a little from the burden of materialism. Have you ever noticed that the more stuff you have, the more it taxes you mentally? When you own more things, you have more things to take care of, more things to clean, more things to fix when they break, and more things to replace when they can’t be fixed. On the other hand, if you had fewer things, you’d have more time for relaxing or productive activities. Materialism will have less of a grip on your life.

At the same time being generous will cause you to feel better about yourself. When you give to another needy individual, you will have relieved them of a little of their worries. Imagine the pride of being someone else’s knight in shining armor! Or, perhaps you give to a volunteer organization that takes care of orphans. Even a meager gift can help out dozens or even hundreds of people who are less fortunate than you.

Another benefit of being generous is that your focus will necessarily shift from yourself to the object of your generosity. You will be less self-centered because you will be interested in the other person or charity. Because you’ve given them money, you’ll want to know how they’re getting along. Maybe your gift was a huge blessing to them, or maybe they could use a little more help. Because you want to know, you’ll spend more time worrying about them and less time worrying about yourself.

And finally, let’s just be honest and admit that being generous will have the rather Machiavellian effect of making people like you. You can consider yourself to be buying future favors. The people who receive your gifts will be forever appreciative, and they will be more likely to respond when you have a need of your own.

So be generous. Be so generous that you aren’t even sure how you’ll get by without all that extra money. It will be a highly profitable exercise.

This post originally appeared in the October 10, 2007 edition of the Greenhorn Valley View.

frugality

I’ve talked a lot before about how debt robs you of your future. To go into debt is to presume that you will have the money at some later point in time, a point at which you would probably rather have that money for other things. But here’s another twist on that same idea: any time you buy anything, even if you pay cash and incur no debt, you are robbing yourself of that same future.

I hear many complaints from people who don’t like being advised to live a frugal lifestyle. “You have to have some fun now,” people say. “I don’t want to live like a miser just so I can go to the grave with a big bank account,” others moan. “Mr. Smith” enjoys reading, double tall sugar free vanilla breve lattes, and eating out. In a typical week he spends $25 on a book, and $75 in lattes and restaurant meals. Mr. Smith complains that he’ll never be able to retire and feels bound to his job. But every week his bank account bleeds $100. Because Mr. Smith wants to “have some fun now,” he is deliberately postponing the day when he can leave his job behind.

What are your dreams? Do you want to buy a house? Do you want to take a big vacation? Do you want to retire early? Do you want to start a business? Whatever your goal is, ask yourself if this latte is worth putting in another hour at work. Or how about this question: “Is being frugal now going to help me reach my dream sooner?” If so, is that a trade you’re willing to make?

minimalism

Many of us recognize we have a problem with spending. Our problem is, we do too much of it. We never have enough money left at the end of the month and we don’t know how to change that. I’ve often heard that the key to being in good financial shape is to spend less than you earn, and do it for a long time. And while that formula certainly will work, it’s too cliched to be meaningful. How, exactly, do I spend less? You don’t know what it takes to keep a family clothed and fed. And how, exactly, to I earn more? You don’t know what my boss is like. This week let’s look at minimalism as a practical method of spending less. As an added benefit, this method will help us look deeply and meaningfully into our inner lives, and help us decide what is most important.

Have you ever thought about how much you actually need to live comfortably? Minimalism is an approach to, well, everything, that helps us get to the least common denominator and stay there. A minimalist tries to find the least amount required to get the job done and still be comfortable, and then hover right above that minimum. For example, how high does your water heater need to be turned up? Why not find out? Go to your water heater right now and turn it down a notch. Tomorrow morning when you take a shower, are you able to get the water hot enough for your tastes? Yes? Then turn it down another notch. Keep doing this until the water is not hot enough for your shower, then turn it back up a notch. Now you’ve found the right level, and are saving as much as possible on your energy bill.

While we’re in the shower, how much shampoo do you need? Can you cut your normal amount in half? If you do, can you still get your hair clean? Again, keep cutting the amount of shampoo until you find the amount that no longer gets the job done, then add back just a little.

This method can be used in just about every area of your life. I’m always looking for new areas I can cut back. But beware, you may end up cutting back farther than you at first anticipate. Using the minimalist method I discovered I don’t need any shaving cream at all! I kept cutting and cutting the amount until there was none left, and I still got a close – and comfortable – shave. (So now I’m thinking there must be some sort of conspiracy in the personal hygiene industry, but that’s a topic for another column.)

Consider minimalism in every part of your life: your work commute, the food you eat, the clothes you wear. Consider finding the minimum amount of Internet, TV, and telephone you need. I bet you’ll be surprised at how much you can trim without even noticing.

This post was originally published in the September 19, 2007, edition of the Greenhorn Valley View (registration required).  Actually, this post didn’t appear in the paper.  It will be in there next week.

buying in bulk

The other day King Soopers was running one of those 10 for $10 specials. They had half-gallons of milk and 200-ct boxes of Kleenex at that price. We needed both those items so I thought I’d grab a few. But when I got there the sign on the Kleenex said if you buy 15 boxes, you get an extra $5 off your total order. So I bought 15 boxes of Kleenex and 6 half-gallons of milk, and the total bill was only $16 plus tax. The Kleenex look beautiful on our closet shelf and I’m happy in the knowledge we can handle all the snot winter can throw at us. The milk is quietly taking up space in the freezer, just waiting to be thawed and poured over oatmeal.

There are two main advantages to buying in bulk. First, you can often get a discount on the purchase price. In this case, the store was using milk and Kleenex just to get me in the door, hoping I’d buy a lot of other things while I was there. Because I didn’t buy a lot of other things, I walked out of the store with some great deals. But even without specials like this, buying in bulk is usually cheaper because of the economies of large lots.

The other advantage of buying in bulk is, obviously, that you end up with a whole bunch of the stuff on your shelf at home. If you plan this carefully, it’s possible to have so many different things stocked up that you’ll only have to run to the store once a month! Imagine being able to skip your weekly shopping trip this week. I bet there are lots of other things you could do with that time. Imagine being snowed in for a week and not having to worry about food.

So save up a little money, wait for the right sale, then go crazy and get all you can (or a least enough to last until the next sale).

This article originally appeared in the September 12, 2007, edition of the Greenhorn Valley View.

financial planning basics

There are several principles at the core of any good financial plan. The first and foremost is this: spend less than you earn, and do it for a long time. And while that doesn’t sound like a lot of fun, it is the only way to get ahead. Over time the few extra snowflakes you don’t spend can turn into a giant snowball, growing more massive with each passing day. But if you don’t seed that snowball with those first few flakes, all you’ll get is – flaky.

Once you decide to spend less than you earn, you’ll be faced with a question: what do I do with the extra? There are many options, of course, but an excellent place to start is with your employer’s retirement plan. The match that your employer contributes to your plan is all gravy – it’s instant profit. To top it off, all the money in the retirement plan usually has quite a while to grow, and in the investment world, time is money.

Once your retirement plan is on autopilot, you should tackle any consumer debt you have, including your credit card debt. Paying a little extra each month on a credit card with an interest rate is the same as earning that same rate in an investment. What I mean is this: if your credit card is charging you 12.99% on your unpaid balance and you send in an extra $100 next month, that $100 is actually earning you 12.99%. This is a rate of return that’s tough to beat without taking a fair amount of risk. (By the way, if you don’t pay that extra $100, the credit card company is earning the 12.99%. Now you know why they’re so anxious for you to carry their card.)

If your credit cards are properly whipped into shape, you should think about building an emergency fund. This is money that will be available to you in case of emergency, so you won’t fall back into the credit card trap. Start out by building up one month’s worth of living expenses. Now when you have an emergency (and that killer pair of shoes at the unheard of sale price is NOT an emergency), you’ll have the money to cover it. And when you don’t have an emergency, that money is sitting in an account quietly earning you interest.

It doesn’t matter what stage of life you are in, or how many of the above principles you have already addressed. Start wherever you are and just take the next step. Once you have addressed all these principles you’ll be in a much better place to begin to think about other investments.

This post originally appeared in the August 29, 2007, edition of the Greenhorn Valley View.

advice from Poor Richard

Many estates are spent in the getting,
Since women for tea forsook spinning and knitting,
And men for punch forsook hewing and splitting.

Thus Poor Richard explains in one of his famous almanacs.  Read it again; 300 year old quotes sometimes require a couple readings to soak in.

Many estates are spent in the getting means that many people are spending, or never earning, great amounts of money; money which, if properly sown and cultivated, would provide that person a large living.

There is little question that human passions and desires (desires for things, leisure, and renown, for example) pull at us and cause us to spend excessively.  How many times have you bought this year’s sandals when last year’s are still in perfect shape?  How many times have you neglected work because you had already done enough to get by, even though a little more would provide exponential returns?  Pushing past these desires and looking just a few minutes into the future can be an extremely profitable endeavor.  If you begin to look, you’ll find small amounts of money turning up under all manner of rocks.

Since women for tea forsook spinning and knitting, and men for punch forsook hewing and splitting.  How often have you chosen a social engagement over completing the task at hand?  How often have you chosen to toss back a few at the expense of a profitable enterprise?  If you’re like me, this happens all too frequently.  We can’t forgo all pleasure, of course, and unhappy is the man who makes the attempt.  Nevertheless, we should make every effort to complete our work before engaging in other activities.  Have you performed your job superbly?  Have you hit your quota for the week?  If so, your leisure will be sweet; if not, the most luxurious of locations will not make you feel truly relaxed.

Follow Poor Richard’s advice.  Work diligently until your work is done.  And then sit back and enjoy the fruits of your labor.

This post originally appeared in the August 15, 2007 edition of the Greenhorn Valley View.

getting out of debt

There’s an old saw that says, “If you find yourself in a hole, stop digging.”  I think most people intuitively understand this to be true.  Still, it can be very difficult to apply this in real life.  Let’s say you’re in debt up to your eyeballs; your credit cards are maxed out, you have two car payments, and you owe a caring relative for the down payment on your home.  Is the solution as simple as “stop digging”?  How do you begin to stop digging?

One very important step, one that people don’t realize exists, but that is of vital importance, is to learn to hate debt.  Debt is your mortal enemy.  Debt will kill you in worse ways than physically.  Debt will gnaw at you, preventing you from being at peace.  Debt must be eliminated at all costs.

One way to begin eliminating debt is to minimize your expenses.  This frees up more money that you can throw at your debt.  There are usually several expenses that can be trimmed.  Have you shopped around for auto insurance lately?  How about homeowners or renters insurance?  Prices for these products are usually all over the board, and spending a few minutes comparing rates might save you a ton.  Other areas where you may be able to save a little are dining out, shopping discount stores, and cutting a car from your household.

Closely related to trimming expenses is increasing income.  Can you get a part time job?  Can you work extra hours at your existing job?  Can you ask for a raise or promotion?  Obviously, earning more money will help your bottom line.  Just be sure the extra income isn’t being wasted.

Another step many people don’t realize exists is to look for sources of encouragement, not discouragement.  The most expensive friends you can have are the ones who spend for fun.  Look for people who enjoy hanging out; having a friend over for dinner satisfies more than your wallet.  Read about simple living.  Rent movies instead of going to the theater.  Grow a garden.  Make a game of saving, and enjoy the hunt.  And remember to keep your chin up.

This article originally appeared in the August 8, 2007 edition of the Greenhorn Valley View.

on emtions and gambling

On a recent out-of-state software development project, the client put me up in a giant casino resort.  This was a Vegas-style resort with acres of indoor slots, poker, blackjack, craps, and all the requisite restaurants to make sure the patrons never had reason to leave.  I had a luxury suite every night, complete with wet bar, hot tub, and three television sets.

While there I saw a commercial on TV.  Coincidently, this was a casino commercial, although not a commercial for the casino I was staying at.  The commercial showed a young couple sitting on the couch watching TV.  Sitting motionless with a glazed look in their eyes, their lives obviously lacked joy and meaning.  Then a commercial for a casino came on their TV.  The commercial showed people at slot machines, energetically pulling the levers, mouths agape and eyes wide with sheer joy.  They were laughing, jumping up and down, high-fiving, and hugging each other.  Coins fell from the machines like rain from heaven.  The camera switched back to a view of the young couple, who looked at each other and shouted in unison, “We gotta go!”

Hmmm, I thought.  Do people in casinos really act like that?  Staying in a casino, I was in the perfect environment to see for myself.  I went for a walk through the game floors.  I went up and down every row, specifically looking at people’s faces and trying to judge their emotions.

What I saw were people sitting motionless with glazed looks in their eyes.  Their lives obviously lacked joy and meaning.  Unlike the commercial, these people were too lazy to pull the slot machine handle; instead they just pushed the button on the front – takes less energy that way.  Also unlike the commercial, most of these people never heard a coin drop.  They had credit-card style casino cards, so that they never had to handle any actual money.  These cards were attached to their belts with a cord.  The effect was almost Matrix-like: row upon row of individual power units, giving their energy and money to the casino through their attached umbilical cords.

Could it be that casinos don’t give joy and meaning?  Could it be that casinos take more than they give?  I’m thinking our young couple would have better luck searching for joy and meaning elsewhere.

This post originally appeared as a column in the July 25, 2007 edition of the Greenhorn Valley View.

bankruptcy

This is my column from the July 18, 2007 edition of the Greenhorn Valley View (registration required):

To be bankrupt means to not have the ability to repay what is owed. You can work yourself into this condition slowly, or it can be thrust upon you quickly.
Business debts and medical debts can rack up quickly and leave your head spinning, without the faintest idea of a clue about how to repay. In these situations, it might be best to forget the whole thing ever happened, and seek legal discharge from your debts.

Or you could simply be living outside your means, spending slightly more each month than you bring in. Over time, this little bit of extra spending can result in maxed out credit cards, massive home equity debt, and payday loans, among other things. Obviously, you are more at fault in this case than with the business or medical case. But even then, legal discharge may be the way to go.

But how do you know if bankruptcy is the right course of action? On one hand, you made a promise to your creditors that you would repay them. This is money you have a moral, ethical, and legal obligation to repay. Imagine how your wallet would feel if you loaned someone some money and they ran off without repaying.

On the other hand, the hole you find yourself in may be too big to climb out of. Short of a rich uncle kicking the bucket in Nantucket, there may not be a way out. The debtor’s prisons of yesteryear were filled with people who were effectively serving life sentences – people without any hope of ever being able to repay.

Bankruptcy is the chance to start over again. Erase all your debts (and assets) and start fresh at ground zero. Like anything else, however, there is a cost. Bankruptcy will show up on your credit report for ten years, which means no one will want to lend you money. And if they do, you’ll pay sky high interest rates.

And if you do consider bankruptcy, don’t forget to consider what got you into that mess in the first place. Are there any bad habits you need to consider? Are you going to repeat the behavior that caused the problems, or have you changed something so that this won’t happen again? The worst thing that could happen is to get a fresh start, only start digging yourself a new hole.

In general, I don’t encourage people to consider bankruptcy. But I don’t automatically rule it out, either. By all means, repay every penny that you owe. But if you don’t have any pennies, it might be beneficial to chew the matter over with someone you trust.

America’s Cheapest Family

Here’s my latest column.

Looking for a way to spend less money? Think there must be a way to wrangle what you need out of life without spending a king’s ransom? During this past month of not spending any money, I read a great book by Steve and Annette Economides (yes, that’s their real name) called America’s Cheapest Family Gets You Right on the Money. Their book is packed with insight for living well without breaking the bank. But they don’t just give you a few tips and tricks; they give you a whole different way of thinking about money. Rather than viewing money as a drug, with all its addictive qualities, they teach you to view money more like a mechanic views his wrenches. A mechanic needs his wrenches to complete the job, but he doesn’t need an ever-increasing supply of them to keep getting ahead. They got ahead on the income they had, not the income they hoped to have tomorrow.

The Economides also publish a monthly newsletter (available at http://www.homeeconomiser.com/), that has more of the ideas spelled out in the book, but in a smaller newsletter format.

Among their great ideas are ways to build up an emergency fund, how to pay cash for cars, and creative ways to pay off your debt quickly. And they have the best solution to the age old question of whether or not to give children allowances. They don’t just hand out money for nothing, but they also don’t tie money to basic household chores that should be done by all family members anyway. You’ll have to read it if you want to know more.

You also don’t have to spend a lot of money for the book. I’m so cheap resourceful I borrowed the book from the library. In fact, that might be a column for another day. The library is a fantastic resource for all kinds of information. I don’t even own most of the money books I read; they come straight from the library.

future debt

My column from this week’s Greenhorn Valley View:

So the thing about debt is, it presupposes on the future.  Let me illustrate.  You want a new computer.  In fact, you need a new computer.  Your old computer was created before the dinosaurs and has about as much memory as one.  So you start looking around and find the latest screaming fast machine that will have people drooling for blocks around.  The only problem is – gulp – it costs way more than you have on hand.

Not to worry!  It can be yours for only $55 a month!  Why, you could find that much between your couch cushions!  What can be a little harder to discover, however, is that you’ll be paying only $55 a month for four years.  If you do the math, you’ll discover that you’re going to end up paying a lot more for that computer than if you had just bought it outright.

But the interest on that debt isn’t my point today.  My point today is that you do not know what the future holds.  Sure you have the $55 right now, but will you next month?  How do you know?  Will you be able to make the payment one year from now?  How do you know?  What if you lost your job?  How soon could you find a new one?  Would it pay as much as your old one?  What if you or someone in your family suffered a major injury?  Where would you get the money to cover it?  Would you end up defaulting on the computer loan?

Here’s another idea.  Instead of buying the computer now and paying for it for the next four years, why not pay yourself the $55 a month?  That way you could pay cash for the computer, not have to pay any interest, gain the interest the money makes sitting in your savings account, get an even better computer (because you’ve waited awhile to make the purchase), and the best part is, if you suffer a job loss or medical emergency, you just stop paying yourself for the computer, and all the money you’ve saved is available for the emergency.  Not to mention the very real, but intangible, benefit of peace of mind that comes from not being enslaved to anyone through your debt.

Give the debt free life a whirl.  You’ll find the benefits well worth the wait.

the end of the experiment

My column from the June 27, 2007 edition of the Greenhorn Valley View:

Well, we did it.  We made it through an entire month, attempting to not spend any unnecessary money.  It was quite possibly the longest month in the history of man.  To be honest, we weren’t absolutely successful.  There were a few times we spent money we didn’t need to: repairing a blown tire caused us to get home really late one evening, so we stopped in town for some dinner; we bought a couple of unnecessary grocery items (coffee creamer, sodas); and we bought some books at our recent out of town convention.  On the whole, however, we spent a lot less money than we normally would have, and in that sense I consider the experiment a success.
While I’m glad we did it, I don’t think we’ll be doing it again anytime soon.  Not being able to spend money when we wanted to caused no end of frustration.  Having money means having power.  I can bring items under my control simply by running to the store to purchase them.  Not being able to spend money required us to think of other ways of getting things done.  Money is also a social lubricant.  Taking a friend out to lunch or buying a store bought gift communicates to the other person that they are more important than the $14.95 I spent on their meal or gift.

In spite of all the downsides to not spending money, I learned some fairly significant upsides.  While spending money can bring things and people under our control, there is another level above the level of spending that is more powerful yet.  What if my friend and I, instead of going to lunch, helped a neighbor dig a ditch, or paint a house, or put up a roof?  Now I have communicated to my friend that working side by side with him for a cause outside of ourselves is more important than the lunch I would have spent $14.95 on.  I have done something significant for somebody else, while simultaneously strengthening the bond between my friend and me.  It’s not easy, of course, and I’ll be the first to admit I prefer the easy path.  But if we put forth the effort, I think we can accomplish much more without our money than with it.