Number 1, I am already fiscally very responsible. I graduated from college and started working less than 3 years ago, and already, I have no debt (my student loan and car loan has already been paid off, and I never carry a balance on my credit card). I put 11% of my income into my company 401K and I have more than 2 years of living expenses in my emergency savings account. So, I really do not have much room for improvement here. Therefore I quickly ran out of financial things to talk about. [Given my current situation, let me know if you can see areas where I can improve. Investing well should perhaps be the next thing I tackle.]

Secondly, even though I need to lose quite a few pounds, I haven’t made much progress in that arena yet. So it is hard to write about that as well.

Therefore it is natural that I am finding it hard to figure out which direction this blog should take. What should I talk about? Do I even need to talk about anything? Who is listening anyway? So let me know if you are out there, listening, and that will give me someone to write for.

I took it on Friday night, and instead of the usual drifting into Nyquil induced sleep, I had a very disturbed and restless night. So the first thing I did on Saturday was to go out and get a bottle of real Nyquil. And guess what. I just woke up after 14 hours of as restful of a sleep as you can get with a cold.

On comparison, both medicines have the same active ingredients, but Nyquil contains alcohol which the generic brand does not contain. So, in theory, they both should have done a similar job, but I thought Nyquil was at least twice as effective as the other one. So, what do you think? Is this all in my mind? Or do brand name stuff actually work better than generic?

Now, according to the above mentioned formula, her net worth is supposed to be age*0.112*income = 25*0.112*40,000 = $112,000

But, in her 3 years of working, she has only made 3*40,000 = $120,000

The difference between how much she has made and how much her net worth should be = $8,000. This means she could have only spent $8,000 over 3 years for all her living expenses. That comes out to be $2,667 per year, or $222 per month. Am I missing something here? How does that even make sense?

Now, you may think that she can spend more than $8,000 because she would have invested the money she was not earning in a high yield investment. Let’s assume she did that, but let’s also tackle the problem from a different angle (that is, we will start with how much money she decides to invest, and calculate her net worth from that). We will also use somewhat more realistic numbers. Say Jane is money smart, and instead of spending the entire $40,000 she earns, she decides to invest 30% of it in a high yield investment that gives her 10% a year. Thus, Jane lives on $28,000 a year, and invests $12,000 for all 3 years she has been working. For simplicity of math, let’s assume she waits until the end of the year to put the entire 12,000 into the investment.

The money she invested at end of  year 1 got 2 years to grow, and is now worth 12,000*(1.1)^2 = $14,520

The money she invested at end of year 2 got 1 year to grow and is now worth 12,000*1.1 = $13,200

The money she invested at the end of year 3 did not get any time to grow and is  now worth $12,000

Thus today, at the end of 3 years of working, Jane’s net worth = $14,520+$13,200+$12,000 = $42,240

As you can see, even though we made Jane a very aggressive saver, and her investment a very high yield one, her net worth is still much lower than what the formula predicts. Unless Jane decided to leverage her money, how is she supposed to have a net worth of $112,000?

If you have read the book, and/or understand what this formula is supposed to mean, please enlighten me. I am going out of my mind trying to find a rationalization of how he came up with it.

Firstly, I tried to plan and attend events that do not cost much money. For example, I watched some TV with girlfriends on one night. But my other cheap ideas like taking a walk in the park did not fly with my friends. So the rest of the socializing ended up being pretty heavy on the wallet. For example, happy hour on Tuesday was $10, dinner out with a friend on Thursday was $26, and bowling on Friday was $15. That’s $50 in less than a week. If I continue this, I will find myself unable to meet the aggressive saving goals I have.

Any advice for someone whose friends make good money but are not willing to be frugal, other than making new friends? I don’t think I can give up more relationships yet (since I just lost one so recently). So, what should I do? Spend the money or be lonely?

In these pages, the author repeatedly tells us that testing high on IQ tests or standerdized tests such as the SAT, GMAT or GRE does not indicate economical success. That much I agree with. Jack is a good student does not imply that Jack will be able to amass a lot of wealth during his lifetime.

Thus, he is correct in saying that one should not be disheartened just because they do not have good academic scores. Doing well in studies is not the only factor that makes one successful later in life. But at the same time, I think what is missing from the book  is acknowledging that it is much harder to be very successful financially if one does not have a formal education. College degrees have a way of opening doors and opportunities that are just not available to someone who never went to college. While some uneducated people are millionaires, there are even more who are poor. And while not every educated person is a millionaire, most of them are above the poverty line.

I actually think having a higher analytical intelligence gives you an inborn advantage in becoming economically successful. If I hadn’t gone to graduate school, would I have as much money as I do now? I don’t think so. I agree that education is not the only factor that made me successful, but I am sure glad I had the education because it would be much harder to be financially independent without it.

What do you think about the correlation between education and money? Let me know.

The idea is that as the economy worsens, the chances that people will default on their credit card loan will increase, making Amex vulnerable since it will have to write these bad loans off. By offering a monetary incentive, Amex is hoping it will be able to coax some of these potential future defaulters to pay up now.

Contrasted with the behavior we have seen from credit card companies in the past (rewards, pre-approved offers etc.), this is certainly new territotry. I wonder how effective this will be given the cost of the incentive plus the fact that many people just cannot afford to pay back what they have already spent. What do you think?