Now You Know Why it’s Called “Personal” Finance

Ask six different people for personal finance advice and you’re likely to get six different answers. Sun recently asked several other personal finance writers and his readers their opinion on a reader’s money question and experienced this first hand.

The Good News
A simple question like “what should my mom do with $1100″ received recommendations for investing, creating emergency funds, buying long term care insurance, and paying off a mortgage. The good news is you always have many options on how to use your money.

The Bad News
The bad news is that after hearing everyone else give you options, now you still have to decide what is best for you. Often personal finance questions are answered with words like assumption, phrases like “it depends”, and the closing disclaimer of “consult a financial professional”. Basically every situation is different, so it’s up to you to take their advice tailor it to you personal circumstances. Hence “personal” finance.

The Money Conversation
The inevitable result of one money question is another money question. Typically followed by another, and then another. We see this in action, as Sun posed a follow up money question to the reader for more background on their situation. Sometimes the conversation is between you and a spouse. Sometimes you’re talking with a co-worker or financial planner. Other times, you may simply debate what to do with yourself, playing one scenario against another.

Being Money Smart
These money conversations are why it’s important to understand or learn financial concepts. Being money literate will allow you to evaluate all of your options and make the decision that is best for you. Notice I didn’t say “right for you” because there are so many different factors and unknowns it is hard to ever say what is “right”. In my opinion, all you can do is make the choice that seems best given the information at hand.

Making Financial Decisions
So the good news is we have options but the bad news is that it’s ultimately up to us to decide which road to take. Of course, it’s really not bad news, just a little overwhelming sometimes. After hearing everyone else’s opinion, how do you go about making tough personal finance decisions?


Carnival of Ethics, Values, & Personal Finance #7

Welcome readers, I hope you are feeling ethical and full of values today!  If not, you’re in the right place at the right time.  The articles below will hopefully give you some food for thought about money and it’s place in your life. 

The first half of the articles deal with the ethics and values of personal finance in one way or another. I’ve included a quote from each post to give you a taste of it’s content. The second half of articles consist of interesting posts, not necessarily having to do with ethics or values in my opinion, that you might want to check out if you have time.

Ethics & Values

Wanda presents Why give? (Or, what if you derive no utility from giving?) posted at Well Heeled.

“If giving DOESN’T make you feel better, if you feel NO sense of obligation to people outside your family or community, if you are financially successful and appreciative of what you have WITHOUT giving, if you don’t have a religious reason for being charitable, why would you give?”

Tracy Coenen presents Investigation of Usana points out the problems with MLM posted at FRAUDfiles.

“However, the vast majority of Usana’s “sales” are achieved only thru the marketing of the “business opportunity.” That is, without the promise of riches, the vast majority of distributors would never purchase any Usana products. “

Tim Abbott presents Berkshares: Local Currency Strengthens Community and the Bottom Line posted at Walking the Berkshires.

“Berkshares represent a community reinvesting in itself, rediscovering its history and revitalizing its economic and social prospects through the use of local script.”

Nina Smith presents WWYD: Paying Children for Good Grades posted at Queercents.

“… we ponder if pay for performance is a child appropriate reward system.” 

Stingy Student presents The End of Affirmative Action posted at Stingy Students.

“Affirmative action is holding back minorities much like wealthy parents who give their adult children financial outpatient care”

Henry presents Investing in Life Insurance Policies: How the Grim Reaper Can Make a Ton of Cash. posted at Binary Dollar!.

“The investor buys the policy and continues to pay the premiums until their old person kicks the bucket.”

bdurfee presents Sharing the Wealth posted at Thinking-Rich.com.

“Changing our attitudes toward money can change our lives by making us more open to wealth. Money is not a four-letter word – so use it!”

Ririan presents 22 Useless Myths That Can Cost You Money posted at Ririan Project.

“Money is the root of all evil, I think a much more accurate statement is that the lack of money is the root of all evil”

Web Financial Planner presents How rich is rich enough? posted at Web Financial Planner.

“It’s all a matter of perspective – and summoning up the ability to toss aside the guilt and anxiety and simply take one small, successful step after another.”

David Weliver presents What I’ve Learned About Money posted at Money Under 30.

“Earning a living is hard work; not spending it all is even harder. The root of all evil is not money, but greed.”

Mr Credit Card presents Did Funky Diner Deserve Any Extra Credit Card Tips? posted at Ask Mr Credit Card’s Blog.

“Would you have even gave any extra tip at all?”

Alvaro Fernandez presents Baby Boomers, Healthy Aging and Job Performance posted at SharpBrains.

“… an increasing likelihood that some lawyers may be practicing in less than ideal conditions for their clients, beyond a reasonable ‘brain age’.” 

Leon Gettler presents Gatekeeper lawyers posted at Sox First.

“In effect, the idea would turn lawyers into auditors. The would have to be independent, sceptical and their first duty would be to investors.”

Other Submissions

Samuel Peery presents Applying GTD principles to your personal finances – Part 1 posted at Getting Finances Done.

tc presents Simple Living – 25 ways to save money posted at InvestmentsLoans.net.

Steve Faber presents - How to Save Money Everyday – A Different Perspective posted at DebtBlog.

WBL presents Improve Your Credit Score by 100+ Points posted at Wealth Building Lessons.

ISPF presents Maximizers and Satisficers posted at Grad Money Matters.

The Frugalist presents 27 Fun Ways to Destroy Your Old Credit Card posted at Frugalist.

Bryan C. Fleming presents Saving Money: $704.51 in 14 Weeks posted at Bryan C. Fleming.

Linda presents Why I save my money posted at MoneyMonk.

Kevin Kinchen presents True Success posted at Creative Power of Thought: Thoughts Become Things.

Brandon Peele presents Spiritual Autolysis posted at GT.

John presents WWYD: Use a Coupon on a First Date? posted at Queercents.

FIRE Getters presents Experiences – Availability of Funds After Cashing a Big Check posted at FIRE Finance.

Thanks for reading! You can submit your article to the next edition of Ethics, Values & Personal Finance using this carnival submission form. Have an ethical day :)


Five Baby Tools We Can’t Live Without

When I first read the article, 10 Baby Items You Think You Need, But Really Don’t, I thought it was a delayed April Fools joke. I kept waiting for the part where they said just kidding but it never came! Below are the items I disagreed with the author on. As a parent of a nine-month old baby, I’ve found these things to be great tools in our parenting toolkit. They may have cost us some money but we’re sure glad we have them.

Bottles
The author argues that most people don’t need bottles. I think most parents will need a few bottles at some point in their parenting career. I agree that nursing is great for the mom and baby. However, my wife works all day. She and many other working mothers need a way to store the milk they pump at work, not sure how they’d do this without bottles.

Pacifiers
What do you do when your kid is screaming in the middle of the grocery store? Our first line of defense is to pop in the pacifier. Well worth the cost.

Baby Swing
When you have a newborn baby and you can’t remember the last time you had decent sleep you’ll do anything to get that kid to take a nap. A good baby swing will put them to sleep so it’s worth its weight in gold.

Playpen
As working parents, we take our son to child care at a women’s home every day. She puts him down for naps in his portable playpen. His pack and play provides a safe and comforting place for him to sleep. Again, worth the money.

Stroller
After being cooped up all day at work or at the babysitter, our family is ready to get out in the evenings. We take our son for a walk as often as we can, without a stroller this wouldn’t be possible.

I agree there are many things that Babies”R”Us will tell you to buy as a new parent that you don’t really need. In my opinion, the items above are not on that list. They will make life happier and easier for you and your baby.


Would You Settle for 500K or Go for a Million Dollars?

Deal, or No Deal! That’s the million dollar question that contestants must answer on the TV game show hosted by Howie Mandel. How you play along with this game might be a good indication of how you view the risks and rewards of investing.

Financial Risk Tolerance
If you’ve ever done any type of financial planning you’ve probably filled out a questionnaire about how much risk you can tolerate. These types of questions are difficult for me to answer because they’re so general, so impersonal, and the questions often seem out of context with life situations. Deal or No Deal on the other hand breaks it down to a basic decision where your answer might tell you a little about your risk style.

The Rules
The contestants on the game show are faced with a set of cases, each containing a dollar amount they can win, ranging from $1 up to $1 million. They randomly open the cases one at a time, once they’ve opened a case the contestant cannot win the amount of money the case holds.

Behavioral Finance
As the game goes on, the number of cases shrinks and how much they can still win depends on which dollar amounts they have not opened. At several intervals the contestants are offered a certain sum of money to walk away from the contest. For example, late in one game there were four cases unopened. The dollar amounts in the cases were $1,000, $5,000, $20K, and $100K. The lady was offered $24,000 to walk away. What would you do in that situation?

In another scenario the four cases held $75, $750, $500K and $750K. The offer to walk away was $291K. Would you hold out for the chance to win $750K or would you settle for $291K. What captivates you, the potential of winning threes quarters of a million dollars or the fear of losing one quarter of a million? What would you do with that money if you won? How would it change your life? Are you willing to risk a lot of money to make a lot of money?

Find Your Sweet Spot
Obviously this is just an initial screen, to determine what types of investments suit you best would require research and planning on your own or with a professional. However, it does help you understand how you react to the financial pressures of risk and how much you’re willing to lose in return for the potential of a big reward.


How to Use Leverage to Make Money on eBay

Big time real estate investors use leverage to try and make big time profits. You can use leverage on a smaller scale on eBay without exposing yourself to the large amounts of risk that they assume.

As I read JD’s post on leverage yesterday I thought about how I currently use leverage to earn 30% to 200% returns on eBay. JD summarizes the definition of leverage as “borrowing money to magnify returns”. I’m able to borrow money to purchase items to resell for a magnified return.

How is this Leverage?
I buy heavily discounted items at wholesale, outlet, or unclaimed goods stores then sell them on eBay. I borrow money for everything I purchase by charging it on my credit card. I take possession of the merchandise, list it for sale the same day, and haven’t yet paid a cent. Depending on how the purchase date falls in relation to the closing date on my credit card, I might not have to pay anything for the item for almost two months. If it sells in that time period, I’ll have made money on an item without actually putting down any cash.

Why is this Low Risk?
Most places have a 2 weeks to 30 day return policy so if an item turns out to be unpopular you can always return it. If it doesn’t sell right away but you purchased it for a low enough price you know it will sell eventually. By keeping it longer, you are no longer using leverage because at some point you’ll have to pay your credit card bill. However, you did get a month to test the market for your merchandise and help you revise your price point, all without paying a dime.

The upside to a leveraged real estate purchase is you can make thousands of dollars if you sell the property. What happens if you can’t sell it? Until you can get rid of the real estate you’re holding thousands of dollars of debt and monthly payments.

With my eBay approach, the items I’m selling are much easier to sell than a piece of property. If I do some bad market research and can’t sell an item for my target price, I can always discount it heavily to make back a portion of the purchase price. Of course, with less risk, comes less reward. Does the work required to procure, advertise, sell, and ship the items pay off?

Is it Worth My Time?
Real estate investors borrow large sums of money so they stand to make large sums if leverage works in their favor. In my case, I’ll earn $15 – $150 per item sold. I won’t get rich on one or two transactions but the income adds up over time. You can use this version of leverage to build up capital so when that great business opportunity does materialize you’ll have the money to jump in.

Not only will this give you the money you need for a business venture but it will teach you about market research, customer service, managing cash flow, product pricing, dealing with risk, copywriting, and other business skills vital to an entrepreneur. So what are you waiting for, get started today!


Personal Finance Week in Review – Yardwork Edition

Now that Spring is here the yardwork calls. I mowed our grass for the first time this season on Friday and then teamed up with a few neighbors yesterday to rent a power rake and do some spring cleaning on our yards. It seems silly to spend so much time and money on just maintaining grass, maybe I should just dig it up and haul in a bunch of crushed stone. Anyhow, here are some good money articles for the week.

Of course there are many more great articles to choose from in the blogosphere, you can always check out the most popular articles at pfblogs for some good reading. Happy Easter!


Always Ask for a Discount

I just ran across a new site called Tricks of the Trade that collects and shares “nifty occupational secrets”. People who have gained inside knowledge by working in a certain industry share their tips with the world.

A recent tip from an anonymous hotel manager is a good addendum to my post Ten Ways to Ask for a Lower Price or a Better Deal. The hotel discount post recommends another way to save.

Always ask for a business discount. You may not have a business, but you work for one–and even if you don’t, how would I know? The worst that will happen is someone will say no.

Most motel and hotels have corporate discounts. Nobody tries very hard to find out how legitimate people’s business claims are, and most of us secretly don’t care.

So there you have it, straight from the horse’s mouth. This tip could be especially useful if you’re staying for more than a night or two. The business discount could really add up if you stay some period of time. Thanks to Matthew Baldwin for putting this site together, I imagine it will be a great place to look for other money saving tips.


Why it Sucks to Work For Chrysler

We all make bad decisions. DaimlerChrysler is trying to break free from its 1998 decision to merge with the Chrysler Corporation and is looking for buyers for the Chrysler assets.

While CEOs and private equity groups try to determine the best way to turn a buck from the game of hot potato with Chrysler, the employees wait with baited breath. If a private equity group like the Blackstone Group or corporate raider like Kirk Kerkorian win the bidding many fear the company will be broken up and sold off.

The auto-makers in Detroit have taken a beating over the last few years and those that have likely suffered the most are the working families that build the vehicles. Now they are caught in the middle of this corporate dance and fear for their future. It is sad watching a once – great company lose its grip but to me it’s even more depressing thinking about the uncertain future of those that worked for years to make the company what it once was.


Is the Turbo Tax Estimated Taxes Product Worthwhile?

I received an email from Intuit today notifying me of a service they provide called Turbo Tax Estimated Taxes that is supposed to be a “quick, easy, and accurate way to calculate and pay your quarterly estimated taxes online”. I’m just now getting ready to make my first estimated payment for my small business and would love something that makes the process quick and easy. The features of the Estimated Taxes tool are:

1) Sends e-mail reminders
2) Calculates your payment
3) E-files and provides IRS confirmation
4) Keeps records and summary report

One thing I’d worry about with an automated payment of taxes would be if the payments weren’t made or too little was paid. According to Intuit, if you “pay an IRS penalty or interest because of a TurboTax Estimated Taxes calculation error” then Intuit will pay you back for the penalty and interest.

They are offering a free trial of the service for one year so I’ll probably sign up and give it a try. After the trial expires it is $29.95 for a 12-month subscription which includes free e-filing. Has anyone else used or heard about Turbo Tax Estimated Taxes? If so, what do you think of it?


How Do You Hold a Debt Intervention?

Thanks everyone for your feedback on the credit card debt vs. emergency fund post from yesterday. The consensus seemed to be that not paying down the credit card debt was foolish but with the caveat that the couple should address the spending problem that amassed the 10K debt in the first place. Another common suggestion was that they keep a few thousand of the emergency fund around for a rainy day.

The next question is what’s the best way to stage a debt intervention for this couple? How do you bring up the subject of debt reduction to a friend? It is obviously a sensitive issue, one that could erupt into an ugly scenario depending on their reaction. In this situation the friend brought up the debt in the first place and even asked for advice so she wouldn’t be addressing the issue “cold”.

This is a tricky situation. You don’t want to make a scene or hurt their feelings because you value their friendship; however, as their friend you want what is best for them. Obviously carrying a load of credit card debt is not in their best interest. Have you ever been in this spot before? What are some ways she can address the debt problem without coming across as too pushy or intrusive?



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