Have you ever found yourself winning a prize you hadn’t even entered to win?  Like, at a drawing at the local fair, you find out that your friends put your name into the raffle, and suddenly you’ve won a big prize, like a car, without any effort or real work on your part?  You’d probably have a huge grin on your face, getting something so great completely out of the blue.

I had a taste of that feeling today.  No, I didn’t win a car or anything like that; but I did have one of my posts featured in an MSN blog post.  Yup, they made a reference to my post on Unemployment and Motivation when discussing the effects of unemployment benefits on motivation to find another job.  Not an off-hand reference at the end of the article or on the fourth page, either; I’m mentioned by name (as Roger, the Amateur Financier) in the third paragraph, and they paraphrase my article over the next three paragraphs.  All in all, it’s one of the coolest things I’ve had happen to me lately (possibly the coolest blogging thing that I’ve ever had happen to me).

Here’s the kicker, though: while my article about unemployment is being highlighted, I’m actually getting pretty close to having a job.  I had an orientation meeting on Monday, and I have an interview on Wednesday.  By this time next week, I could actually be employed again, in a job in my field that pays nearly as much as my last job (which does help support my argument in the article about holding out for a ‘good’ job while collecting unemployment).  If this week keeps going the way it has, I might have to go out to a casino; I never have this kind of luck.

Successful Yakezie Members

I’m not the only one who’s had a run of luck, it seems; when I was looking over latest Yakezie Challenge standings, I noticed that were more than a few of my compatriots who have met their goals.  At least the initial goals; there’s always more than you can do, and higher ranks to be obtained, especially as nobody’s broken 50,000 yet.  Although, our fearless leader, Financial Samurai, is getting there pretty quickly.

With a combination of hard work, luck, and of course, some powerful friends, it looks like Money Funk and Punch Debt In The Face (great blog name, by the way) both beat the 200,000 ranking this past week.  They have a lot of company; Planting Dollars, Sweating the Big Stuff, Monevator, Fiscal Fizzle, MBA Briefs, Early Retirement Extreme, Enemy of Debt, *takes a deep breath*, My Journey to Millions, Deliver Away Debt, and the Ultimate Money Blog, have all cleared the 200,000 Alexa hurdle already and are bearing down on 100,000.  (Hopefully, I’ll join them soon.)  Of those blogs shooting for 50,000, Budgets are Sexy and Free From Broke both cleared 100,000 first (although they were pretty close to that amount at the start), and Eliminate the Muda cleared both 200,000 and 100,000 in its ascent to the top.

It looks like many of my fellow Yakezie members are well on their way to dominating the personal finance blogosphere (and then the world…but perhaps I’ve said too much).  In hopes of boosting up some of the members who haven’t gotten that far yet, here’s a round-up of some of the other Yakezie who are still shooting for 200,000 along with me:

Good Yakezie Posts

Pros and Cons of Being Cash Only – While I’m more a fan of credit card use myself, Red does make some good points about why you might opt for a cash only life.

Day 21: A Dull Monday Morning in Australia… – Not really personal finance related, but how can I resist a post mentioning a photographer who gathered up a bunch of nude people and got them to pose for a picture?

Avoiding Reactive Personal Finance – It’s hard for most of us, but planning ahead for emergencies is much better than trying to react once something happens.

Fix-It Friday: Know Your IRS Forms – Good advice as get (even deeper) into tax season, knowing your tax forms (or getting help from someone who does) can save plenty of time and money on your part.

The 5 Books that Changed My Money Life – As you’ve probably noticed from my weekly (or so) book reviews, I like to read, particularly about personal finance, and so these five ‘mini-reviews’ on books I’ve either read or have on my ‘to read’ list is quite helpful.

“Making Work Pay Credit” and the SAHM – An interesting look at the new tax credit available this year.

What’s Your Latte Factor? – An interesting discussion of the little money vices that end up costing us lots of money over time, using David Bach’s concept of the Latte Factor.

Where the Amateur Financier Has Been Featured

My post on unemployment and motivation was very popular this past week; in addition to MSN, it has been featured in round-ups from Well-Heeled Blog,151 Days Off, Planting Dollars, and Wealth Pilgrim

The latest Yakezie Carnival included my post on the challenges of holding physical gold, as did Monevator

That’s it for this week’s round-up; if you’ll excuse, I’m off to bask in my new-found celebrity a bit more.  (Kidding; I’m just the same Roger, if a bit more shocked.)

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I’m a mood that combines playfulness with nostalgia.  I think it’s because I’m currently back home and have a job interview today, so I’m both happy and thinking about my past.  I’ve been thinking a bit lately about some of the stories and fables I was told as a child.

So today, let’s have some fun with some of the most famous of Aesop’s fables, and see how we can apply the lessons found within to our personal finance situations.  After all, these are stories that I (like many of you, I’m sure) have heard since I was young.  Let’s go on a trip down memory lane and see what we can learn about money management from good old Aesop.

1) Fable Name: The Ant and the Grasshopper

Short and Sweet Summary: There was once an ant and a grasshopper.  (Good start, no?)  The grasshopper laughed, frolicked and played the days away, while the ant diligently spent his time during summer and fall gathering up extra food.  The grasshopper laughed at all this effort; why gather food when there was such an abundance all around them?  When winter came, though, the grasshopper found himself out of food while the ant had plenty, and the grasshopper comes to realize the folly of his short-sighted ways.

A hardworking ant, possibly working hard

(Depending on what version you read and the particular message the author is trying to push, the final fate of the grasshopper and the ant (or ants, in some versions) can vary.  In the most traditional versions, the grasshopper dies from starvation.  Since this doesn’t make the most child-friendly ending, in many cases he gets food from the ant, usually in exchange for providing some service or at least promising not to be as lazy in the future.  There are also plenty of more politicized versions, having the grasshopper suing the ant and taking his hard-earned food (to send up socialist/communist worldviews) or attacking the ant for being so stingy (to attack those who hoard wealth).  For our purposes, we can end the story once the grasshopper realizes the error of his ways.)

General Moral: Prepare today for lean times tomorrow.  Also, if an ant and a grasshopper both offer you financial advice, go with the ant.

Financial Moral: Pretty much the same as the general moral; be sure to stock up on money (or other supplies, etc.) while you have the opportunity, particularly if you know the lean times will be coming.  Replace ‘winter’ with retirement, ‘food’ with money, and ‘ant’ with anyone who didn’t get a trust fund for their 16th birthday, and you have a pretty good plan for saving for your golden years in our ‘fund your own retirement’ economy.

2) Fable Name: The Tortoise and the Hare

Short and Sweet Summary: A tortoise and a hare have a race because the hare was talking smack about the tortoise’s mama (or possibly just called the tortoise slow).  During the race, the hare takes an early lead, getting so far ahead that he decides to take a nap (or goes off to play keno, depending on the version of the tale).  While the hare is distracted, the tortoise slowly but steadily catches up, and then overtakes him.  By the time the hare wakes up (or gets kicked out the of the casino due to his bad credit), there’s no way for him to beat the tortoise.  Victory to the slow guy with the shell!

General Moral: Slow and steady wins the race, OR don’t take a nap until you finish the darn race.

Financial Moral: Pretty much the same as the general moral (the one about slow and steady winning in the end, not the napping one).  A decent to good financial plan, implemented over the course of a lifetime, will be much more effective at boosting your net worth than a great financial plan you only follow off and on.  (Note: you should not take the lesson that betting on a long shot in a race is a good way to improve your financial security; they’re long shots for a reason, and no every gamble will pay off in the end.)

3) Fable Name: The Dog and the Bone (noticing a pattern to these names yet?)

Short and Sweet Summary: A dog goes walking alone with a bone in his mouth.  He looks down into a still pool of water, and sees another dog looking back at him, also with a bone in his mouth.  Getting greedy as he looks at the other dog’s bone, and thinking that the other dog looks like a bit of a push over, our first dog opens his yap and barks at the second dog.  His bone drops into the water, disappearing under the waves, leaving the dog (and his reflection) without any bones at all.

Pictured: Dog; Not Shown: Lost Bone

General Moral: If you get greedy, you risk what you already have.  Also, mirrors can steal your soul (or at least, confuse you, if you happen to be a dog).

Financial Moral: Let’s quote another source of great wisdom, Warren Buffet: ‘Rule #1: Never lose money.  Rule #2: Never forget Rule #1.’  As with bones, so it is with money; it’s much easier to keep what you already have then it is to earn more.  If you get greedy and try for excessive gains, you can end up losing what you already have.  (Add in the number of scams and other simply fraudulent ways people will try to get your money, and the importance of keeping what you have comes into sharp relief.)  Invest smartly and don’t try to shoot for the moon with your returns, and you’ll have a much better shot at growing your wealth and adding to your supply of bones (or cash, if you prefer that type of thing).

4) Fable Name: The Goose that Laid the Golden Eggs (just like that, the pattern is gone)

Short and Sweet Summary: A farmer and his wife (I picture them as Ma and Pa Kent from the Superman comics, but I’m pretty sure that’s not what Aesop intended) discover that they have a goose who lays golden eggs.  After a few days of enjoying the bounty this goose puts out, they get impatient, and slaughter the goose to get all the golden eggs at once.  Alas, once the goose is dead, they find no golden eggs inside, and realize that they’ve just killed a source of great wealth.

General Moral: Greed and impatience destroy wealth.  Also, geese aren’t filled with all the eggs they’ll ever lay (at least, not in fully developed form).

Financial Moral: As usual, the general moral can be pretty easily applied to the personal finance; get greedy and it’ll backfire on you.  This is most apparent when looking at your nest egg (an apt term for a waterfowl based fable); if you start with a small, safe withdraw rate when you retire, your nest egg will have the chance to grow, continuing to generate more money (golden eggs) for your spending pleasure.  Pull out too much of your money in the first few years, and watch as your nest egg quickly withers away, and you spend your retirement years desperately searching for more money (or a goose that lays golden eggs).

Alright, that’s enough nostalgia for one day; hopefully, there’s plenty of stories mentioned here that spark a few memories of your own childhood, and maybe, just maybe, remind you of a

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Whistles blow, car horns honk, things get thrown around the room and screams echo throughout the room.  The sounds of bulls, bears, and pigs are heard on a frequent basis.  Occasionally, even the sounds of ghosts are heard in the distance.  Is this a sign of the Apocalypse?

No, it’s Mad Money, the investing show from Jim Cramer.  If you ever felt the urge to go behind the scenes of this madness, you can read Jim Cramer’s Mad Money to get an even deeper understanding of the show, as well as Jim Cramer’s broader investment strategy.  Is the book a ‘Buy, Buy, Buy!’, as Cramer’s sound effect board would say?  We’ll have to look closer to find out

Summary

Jim Cramer’s Mad Money is a stock investing book, pure and simple.  The introduction plays up the book as a follow up to Jim Cramer’s Real Money, his first investing book.  It’s designed to share many of the lessons that Cramer learned in his first year or so of running his Mad Money show, in all its crazy glory.

The first three chapters are all about how to buy a stock, Mad Money style.  The first chapter is about knowing yourself and your goals.  Cramer makes the point that different people, at different stages of life, can invest in different ways; when you’re younger, you can afford to take more risks with your money.  The chapter stresses four different aspects that will determine how much (if anything) you should invest in stocks: your age, income, personality, and priorities.

The second chapter is all about doing your homework, at least one hour per week per stock that you own (or want to own), according to Cramer.  He has five areas you need to cover before you buy a stock: how the company makes money, the sector of the market it is in and how that sector has performed, the stock’s performance, how the competition is doing, and looking at the company’s balance sheet.  Chapter three is where you finally buy the stock; always using limit orders (where you set the price you’re going to pay for the stock) and buying a little bit at a time.  Once you buy the stocks, though, the homework has to continue, at one hour per week.

Chapter four looks at the other side of the coin, how to sell the stocks when the time comes.  Cramer provides a number of suggestions for when to sell (no hard and fast rules, as he acknowledges that everyone is different and has different needs).  One suggestion is to sell enough to get the amount of the stock you own back to the dollar amount you initially invested.  Another one is to set a target price you expect the price to hit, and sell when it reaches that price.

Chapters five and six cover the ‘Lightening Round’, the part of Mad Money where Cramer takes phone calls and provides a buy, sell, or hold verdict on a particular stock after just a short period time to consider them.  Chapter five details much of the thought process he goes through during that time, and shares the three dirty secrets he uses to do it every night.  (They aren’t that secret; he (a) has lots of experience, (b) really enjoys stocks, and (c) finds it easier than it looks.)

Chapter six covers how to do the same type of quick analysis yourself (the ‘Lightening Round Home Game’).  It’s a three step process; first, know what sectors (and subsectors) there are, then, form an opinion on each one (whether the automobile sector is going up or down, for example), and lastly, rank the top few stocks (’best in breed’) in each sector.  That way, when you’re asked about a particular stock, you have a ready rubric to help you decide whether it’s a buy or a sell.

Chapter seven covers what to look for in the interviews that Cramer does with CEOs and CFOs.  Depending on how they react (and in particular, how open they are about their company, even if it is currently going through tough times), there’s apparently a lot of information that can be gleaned from these interviews, even if SEC regulations prevent them from revealing anything not disclosed to other investors via public notices.

Chapter eight is a compilation of some of the mistakes that Cramer has made on his show, and the lessons he’s learned from them.  Some of these lessons include how to do the right type of homework (if you’re planning to buy and then sell in the short term, you shouldn’t be looking at the longer term prospects for the company, and vis versa) and that commodities companies are not interchangable, even though their products are identical.  In the same vein, chapter nine covers some of the lessons gleaned from his successes; some examples include to watch what the Street (that is, big mutual and hedge funds on Wall Street) does and mirror that unless you have good reason to think that they’re wrong, and not to be snob and consider all investment ideas, even those that come from an average middle-class life.

The last few chapters go into more depth on the show itself; chapter ten covers how Cramer chooses the stocks that are to be featured on his show, including watching what his charity fund invests in and paying attention to what he likes and dislikes on the show itself.  Chapter eleven covers many of the aspects of the show itself, from his trademark ‘Boo-yahs’ to the sounds on his sound board and what he intends them all to mean.  The book ends with a worksheet to evaluate stocks (a la Chapter two) and a revised guide to cyclical investing (which he introduced in Real Money).

Pros

-Intelligent and Insightful: Although you might not guess it from watching the show, there is in fact a method (and a rather impressive one) behind what Cramer says and does in the course of his broadcast.  He emphasizes the importance of doing thorough research before making a stock investment and knowing how to read through the information provided by companies.  If you followhis techniques, you should have more success in stock investing than if you merely follow stock tips (including, interestingly enough, the tips on Mad Money).

-Stresses the Importance of Research: Almost everywhere you turn in the book, you’ll find Cramer hammering home the need to do research before and after any stock purchase.  A repeated refrain throughout the book is the need for at least one hour of research per held stock per week to keep up on the changes with the company or the stock that might change its prospects.  Add in the warning against buying a stock recommended on his show (or any show) in the first twenty-four hours, and you have a surprisingly sedate argument for a calm, methodical investment method from a guy most famous for almost literally bouncing off the walls on screen.

-Entertaining: Probably not a surprise, the book is rather amusing, even laugh-out-loud funny at times.  Even when discussing things like P/E and PEG ratios he manages to be more entertaining than many personal financial writers are while trying to make jokes.  It makes the book a rather quick moving read, as well as a general pleasure.

Cons

-Aimed at Mad Money Fans: If you haven’t ever watched Cramer’s CNBC show, much of the book will make little sense.  After the first four chapters (which are fairly useful regardless of how much CNBC you view), the book pretty much turns into all Mad Money, all the time.  The last few chapters in particular are less investment advice, more behind the scenes.  If you’re not a fan, much of the book will seem rather unhelpful.

-Lots of Information, Without Much Explanation: The parts that do focus on investing directly (rather than Mad Money) are useful, but in his attempt to give you all the information you need for investing in a few chapters, Cramer sometimes makes his book nigh incomprehensible.  This is most notable in chapter two, where you get a flash lesson in cash flow statements and balance sheets.  It took several read-through to get everything that Cramer was trying to illustrate (and I write about this stuff for my blog).

-Focuses on Short(er) Term Trading: While Cramer doesn’t explicitly recommend day-trading (and chides people for doing so), he does tend focus on short term investing, holding stocks for months or even mere weeks, to say nothing of buying stocks in small portions over a period of time.  While this can be profitable (Cramer himself is proof of this), for many people it can lead to excessive buying and selling.  If you can keep up the research that Cramer recommends, it can work out, but otherwise, it just adds to your costs.  (Plus, as you’re probably aware, in the mutual fund world, indexes are more profitable than actively managed funds for exactly this reason.)

Conclusion

If you’re a huge fan of Mad Money and want to learn how to play along at home in a smart manner, Jim Cramer’s Mad Money might be right for you.  If you’re simply interested in learning how to buy and sell individual stocks, you’re probably much better off with Jim Cramer’s Real Money, which provides more information for the first time stock investor (and less promotion for the show).  If you’re not interested in individual stocks at all, Jim Cramer’s books, while still interesting, probably aren’t the best for you.

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In the spirit of the ‘Playful Dance‘, that is, responding to other bloggers’ posts in my own posts, I’m going to start what I hope is a long-running series where I write a response to something another author has put up.  Sometimes I’ll agree, more often I’ll disagree (it gets pretty boring if everyone is saying the same things all the time), and most of the time I’ll simply try to find an alternative view on what is being said.  Enjoy it, and be sure to check out the article I’m responding to, as well; there’s plenty of great personal finance writing out there, just waiting to be found.

When going back over some of the posts published last week to find what I should include in my latest round up, I came across Holding Physical Gold is About Safety, Not Speculation from 20s Money.  He advocates holding gold (actual, physical gold, stored at home) as a way to be more secure.

I have to disagree.  While gold can be add diversification to your portfolio (I said as much way back when I covered gold for my Investing 101 series), I think that some of the reasons provided could be misinterpreted.  Here’s my take on a few of the claims made:

Claim One: ‘The reality is that gold [and silver] will have value today, and hundreds of years from now.’

Yes, and no.  True, there are uses for gold beyond serving as a store of money.  However, the major use for good in current society is to look pretty and serve as a store of wealth.  If something happens that would lead to a great deal of new gold being produced (say, a massive new gold mine or the discovery of alchemy-like process that can generate a great deal of gold), the price could very easily drop far below the current levels, leaving you holding gold worth much less than you actually paid.  If gold prices behave as they have in the past, after the last big run up in price, they’ll actually start falling once things return to normal (as they have for most of the past quarter century).

Claim Two: ‘If the dollar continues to weaken, which has been the trend, we will be not hurt as badly if we own gold [and silver].’

This is a trickier one.  Yes, holding assets that aren’t denominated in dollars and which tend to hold value even as the dollar declines is one way to hedge against a falling dollar.  However, holding physical gold is far from the only, or even the best way, to do so.  Holding foreign stocks, bonds, or even foreign currency provides a more ready way to hedge against falling dollar prices; when a stronger foreign currency is converted into a weaker one, you’ll end up getting more bang for your buck (or rather, more bucks for your Euro, pound, yen, ruble, etc.).  The transaction costs will be less than buying and selling physical gold, and if you’re holding foreign stocks or bonds in a mutual fund, the disbursements will be automatically converted to dollars before being sent to you.

Claim Three: ‘What does concern me is that I am more secure by having some holdings of physical gold [and silver].’

This one, I suppose, depends on your definition of security.  Holding a sizable amount of physical gold in your own house will save you from paying the costs for a safe deposit box or other source of gold storage, but there are downsides, as well.  You need to worry that your gold could get lost or stolen, that the gold is, in fact, gold (as well as the same quality and quantity you originally paid for) and whether the transaction costs of buying and selling the gold will destroy the actual value of the gold itself.  With all those problems, it seems hard to justify the ownership of gold, at least, physical, you need to find a place to store it and protect it, gold.

My Conclusion

In spite of all of this, I have no real problem with gold investing.  All I ask is that you consider exactly why you’re doing so, look at some of the alternatives (both alternative ways to invest in gold, rather than holding gold bullion at home, and alternatives to gold investing itself), and do what makes the most financial sense for your situation.  If that means having some gold at home in a safe place because it helps you sleep at night, go right ahead.  Just know the real price of that insurance, in terms of dollars, investment risk, and storage costs.

(Before I forget, Kevin wrote a post that referenced my blog, the The Allure of Alexa, which inspired me to read his blog and write this post in response to one of his other posts.  So, um, this is a sort of thank you where I nitpick your argument the whole time.  You’re…welcome?  It was really all in good fun and the attempt to spread the word, my friend.)

What do you think about gold investing?  Did I miss any major pros that more than justify the cons listed here?  Did I completely misunderstand Kevin’s point and reasoning behind his gold investments?

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As you’re probably more than aware by now, I’m participating in Financial Samurai’s Alexa Challenge in an attempt to boost my blog’s visibility and influence.  I’m proud, if a bit surprised, to say that in the course of less than a week, my ranking has gone from roughly 515,000 to a little more than 393,000, a jump of nearly 118,000 ranks.  If I keep up this pace, I’ll meet my original goal of breaking 200,000 by the end of the month!

Admittedly, the higher I climb in the ranks, the more intense the competition becomes; it’s like going from the minor leagues into the majors, you just find yourself facing tougher and tougher opponents the higher you go.  Additionally, as Financial Samurai notes, the challenge increases as time goes on.  The goal of 200,000, once a ranking that put you amongst the top one hundred personal finance bloggers in the world, is no longer enough.  (FS also made mention of these very round-up posts, which was certainly a nice gesture.)

All the more reason to work even harder, to do whatever I can to improve my image amongst other bloggers, and to promote the heck out of them in hopes that they will do the same.  On that note, let’s get to the real fun of these round-ups; great posts from other bloggers:

Good Yakezie Posts

CARD Act: Credit Card Reform Act of 2009 – A great list of all the changes to credit card law brought about by the CARD act that recently put into place, one that puts even mine to shame.

Why Does Joe Public Love Sweatshops? – Not just getting the products from them, but the idea of working in them.  I think it’s nostalgia for an older, simpler (although also dirtier, more exhausting, and more painful) time.

Why Does Everyone Hate on Financial Planners? – My guess: a combination of anger at the corrupt ones (who are a small percentage of the whole, I might add) and feelings that they (the public, not the planners) should be able to handle their own money without help.

Combat the Closing Techniques – The Power of Suggestion – Another in a series I really like, showing you how to fight back against various sales techniques.

No More ‘I Can’t Afford That’ - When you have the money, but choose not to spend it, you should be proud to say as much.

‘The Snark Handbook’ Review and Giveaway – Be sure to enter for the chance to win what seems like a hilarious book!

Should Wannabe Entrepreneurs Eliminate Debt Before Opening Their Doors? – It’s probably a good idea, but probably not necessary.

You Can’t Afford Kids – A conversation stopper right there, although it raises some interesting points about when in your financial journey you should add kids to your household.

The Reason for the Dearth of Investment Posts on ERE – A cogent reason for not posting more on investing from a fellow blogger; if I didn’t love writing about investing so much, I might just take his advice.

It’s Your Money, YOU Spend It! – How to handle being ‘volunteered’ to spend money (for special events like birthdays, anniversaries, etc.)

Other Good Posts

Unconventional Personal Finance Advice – Some advice that might go against the grain of commonly cited personal finance rules.

5 Situations Where You Should Leave Your Credit Card in Your Pocket – A good list of times to use cash rather than plastic (paying taxes is one I wouldn’t have guessed)

6 New Credit Card Rules – Another article about the CARD act; a very succinct one, as well.

Can America Learn to Save From My Dog? – Dogs put aside biscuits or bones for a rainy day, why can’t we?

$3,000 Cash for Caulkers Revealed - The details of the new plan revealed, for better or worse.  (Also, who do I have to write to in order to get people to stop giving these programs alliterative nicknames?)

The Amateur Financier Around the Web

The Carnival of Money Stories hosted my last Wacky Wednesday post

Monevator’s latest Round Up featured my post on Taxing Financial Transactions, as did the Weekly Round Up on Money Funk

A Weekly Wisdom round-up (great name, by the way) featured my post on Hyperbolic Discounting

If I missed any round-ups or other posts that featured my blog entries, just let me know; I want to promote the heck out of you (and not just because it’s a roundabout way of promoting myself)  Good day, everyone!

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So, if you’ve been watching the US Senate, lately, you’re probably well aware of the latest drama, with Jim Bunning attempting a one-man filibuster to stop the payment of unemployment benefits.  Although he recently backed down, the reaction to his stand brought out some interesting discussions about politics, budgets, and spending.

Another issue that was brought to surface by this debate is whether unemployment benefits are even good for society as a whole.  The benefits are that it provides a safety net for those who find themselves out of work, enabling them to take time to find another job of their choice, usually in the same field for about the same rate of pay.

Unemployment benefits seek to keep us out of here...

The downside, though, is that such benefits may actually aggravate the level of unemployment.  If you don’t have to work to get money, after all, aren’t you going to be less motivated to do so?  Nina Easton, among others, notes that studies have found that the unemployed people tend to stay unemployed as long as the benefits keep coming, using the benefits as an excuse to put off taking lower paying jobs to survive.

So, who’s right?  It’s hard to say exactly how unemployed people are affected by having unemployment benefits available; there are currently millions of people out of work, and as with any group, different people will react in different ways.  Luckily (or unluckily, I suppose) I happen to have a perfect subject to gauge just how unemployment benefits can distort incentives right here: me.

A Case Study in Myself

Yes, in the past year or so, I’ve found myself out of work on two separate occasions.  (Technically, three, although the third was for a brief period after I ended a temp position but before I started another one, so I didn’t take unemployment benefits, and thus, I’m not counting that.)  As a result, I’ve been collecting unemployment benefits for much of the last year, so much so that I’ve actually exhausted the normal amount of benefits available to me and am only still receiving unemployment due to the many extensions that have been passed over the past few years.  (Just like the one Jim Bunning was filibustering against, to tie everything back in.)

So, how did unemployment benefits affect me and my desire to gain a job?  Well, the critics of unemployment do have a point; I HAVE been pickier about possible jobs than I might be otherwise.  Since my most recent job loss in November, I’ve been focused more on trying to regain a job at my previous level of employment, rather than ’settling’ for a lower income job as I might have been forced to without unemployment.  From an economic stand point, the existence of unemployment has demotivated me in my job search, exactly what critics fear would happen.

HOWEVER, that’s not the whole story.  While it’s true that I haven’t been working in a paid position during that time, I haven’t exactly been idle during this period, either.  In addition to continuing to search for a job in my field of study, I’ve also taken the GRE in preparation for going to grad school, continued the work on this very blog, and looked into other possibilities for making money outside a typical nine-to-five position.  What is often left out of the debate over unemployment benefits is exactly this kind of transformation; having a period of time after losing your job to re-evaluate your life and make changes for the better (without needing to take any job that will have you just to put a check in your account and food on the table) is one of the greatest advantages of unemployment as it currently exists.

(While we’re on the subject, I’m a little leery of the argument that society as a whole is better off if I take a low-paying job, at least in the short run.  Yes, in the long run, my work will help the company to expand, provide money for me to spend or invest, and generally help the economy to keep growing; far be it from me to argue with any of that.  However, in the short run, I’m shorting myself of time to building my skills or work on an entrepreneurial endeavor, taking a job that could be filled by someone else, and causing the company I’m working for to spend money training someone who’ll leave at the first opportunity that presents itself.)

Even with the possible demotivational effects, I tend to think that the pros of unemployment benefits far outweigh the cons.  Yes, they might have the adverse effect of keeping unemployment higher that it might be otherwise, but the advantages offered to the unemployed more than make up for that fact.  At least, they do in the case of this one guy I know…

What do you think about unemployment benefits?  Are the cons enough to outweigh the pros?  Is it better to encourage people to take a job, any job?  Do you think that employment status makes it hard to think about this issue objectively?  (I.E., I’m currently unemployed and like the unemployment system.)

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Wow, February went by fast, didn’t it?  I suppose this is to be expected, since it is the shortest month, but dang, twenty-eight days never seemed to move so quickly.  It’s probably a sign that I’m getting old; when I was younger, it seemed to take forever for each day to go by, let alone an entire month.

I suppose this is part of growing older, partially because it puts time into perspective, and partially because we inevitably get busier.  Yes, the carefree days of youth are long since past, and even when I’m between jobs, there is inevitably so much to be done.  In fact, it seems like I’m even busier now; looking for jobs is nearly a full-time job itself, to say nothing of trying to keep my blog running, doing chores around the house (I’m the official dishwasher and dog walker at home, among other things) and doing other hobbies.  Pretty soon, the whole day is gone.  Plus, apparently the day is literally getting shorter; NASA notes that the recent earthquake in Chile actually shifted the Earth’s axis, shortening the day.

Alas, such is life, I suppose.  We have to adapt to whatever life throws our way, even shorter days and more work to be crammed into them.  With that out of the way, let’s get to the real fun; it’s time to go over how my financial situation has changed in the last month:

Money-wise, February was pretty good; I increased my net worth a bit, decreased my outstanding debt a little (although, since I pay off my credit cards each month, this means I spent nearly as much in February as I did in January, when I spent more than I was planning to spend), and my investments did alright overall.

You’ll also notice an interesting addition on the bottom of my net worth chart.  Since I joined the Financial Samurai Alexa Challenge last month, I thought it might be fun (and informative) to start keeping track of my Alexa ranking right along with my net worth.  In the course of a month (actually, less than a month; the starting number was taken on February 5th, and of course, February is the shortest month) my ranking jumped up more than 100,000 ranks, putting my humble little blog solidly in the top half-million websites IN THE WORLD!

Most incredibly, more than half of the gain occurred over this past weekend; I went from 515,000 on Friday to 480,000 on Saturday to 460,000 on Sunday.  I’m not sure what exactly what made this weekend so special, although my post on death taxes brought out more responses than I usually see.  A few more weekends like that, and I’ll make my goal of 200,000 by July 4th easily.  Banzai!

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One of the biggest problems with many personal finance books is that they are written with the assumption that everyone is the same when it comes to money.  There’s a single path to financial security that is laid out, which may be different for each adviser, but assumes that everyone has the same goals and end desires.  You might not be on the same step, but inevitably, you’re moving toward the same goal.

Master Your Money Type from Jordan Goodman takes a different approach.  Rather than assuming that everyone is the same when it comes to money, it looks at six different money ‘types’; distinctive personalities and approaches to earning, investing and otherwise using money.  Does a more varied approach yield a better personal finance book?  Let’s find out.

Summary

The first chapter starts out with the basic premise: that by understanding how you deal emotionally and psychologically with money, you can get a better grip on your finances and control your spending, investing, and saving habits better.  It then provides a brief overview of the six money types covered in the course of the book: Strivers, Ostriches, Debt Desperadoes, Coasters, High Rollers, and Squirrels.

The second chapter takes a closer look at the emotional relationships we have with money, and how it can affect our attitudes and actions.  As Goodman notes, there are many different things that money can mean to us; for some of us, money is a source of security, for others, it’s a source of power, and for still others, it means means love, happiness, or a way to relieve our pain.  These feeling are born from a number of different sources, from our parents’ and grandparents’ attitudes about money to our experiences in childhood and as young adults.  The chapter ends with some of the basics of acknowledging, confronting, and changing our undesirable fiscal personality traits in order to get our financial house in order.

The next six chapters (which compose the bulk of the book) look over each of the aforementioned personality types in depth.  Each one explains what the main traits of the personality type are, the pros and cons associated with each type, and several examples of people whom Goodman has worked with in the past who exemplify those those personalities.  He then covers some of the more harmful traits each personality exhibits, and provides a shift in thinking to help rectify them.  Once the emotional stuff is out of the way, he provides a financial plan to help each type get their finances under control, usually with tools most appropriate for each type.  Each chapter ends with a list of resources that will be most helpful to people with those personalities.

First up in chapter three are the Strivers.  These are the people with a strong desire to be successful, or more importantly, to be perceived as successful by those around them.  At their best, Strivers are driven, focused, and determined to make their goals a reality; at worst, they stretch too far to appear well off, overestimating their income and underplaying their expenses.  The solution for this overreaching is to rein in the tendency to stretch their budget to show off their self-worth, and there are numerous budgeting and cash flow tools at the end of the chapter to allow them to still put their wealth on display, but doing so while staying in budget.

The second major type is the Ostriches, so called because they bury their heads in the sand when it comes to money (never mind that real ostriches don’t do that; it’s too good an image to resist).  The good news is that this group isn’t consumed with money, but they take it too far, not knowing (or caring) enough to get their money under control, and sometimes falling for bad advice because they don’t have the savvy to realize how bad it is.  The solutions given are to take control of their money, in the least painful ways possible, by automating their savings and investments as much as possible.

The next chapter covers the Debt Desperadoes, possibly the group with the fewest positive traits (mainly the ability to bounce back from a crash) and several negative ones, including denial of the reality of their situations.  The chapter opens with a quiz to see if you’re spending too much and several of the reasons that people can get in high levels of debt.  The list of financial solutions range from creating a financial plan to deal with the existing debt to the possibility of bankruptcy.

The Coasters are an odd breed, having a a decent handle on their spending and earning, but not having a longer term plan.  They have a tendency to prefer stability to change (even positive changes).  There’s a sub-category called Optimists who have a tendency to believe that everything will work out, and that the universe will provide what they need in life.  The major piece of financial advice for these groups is to expand their financial planning to ensure that their plans will cover ALL their goals, with plenty of retirement planning tools included.

The High Rollers are next; their pros include a high tolerance for risk and belief in their vision, while their biggest problem is the tendency towards thrill-seeking and gambling.  The major suggestions include making educated gambles, shifting a portion of invested money into safer investments like bonds, and making sure that the money put into speculative ventures can reasonably be lost without adversely affecting longer term goals.

The final group is the exact opposite; Squirrels value stability and safety over everything else, and as a result, have a tendency to live much below their means and not enjoy life as much as they could afford to do.  This is taken to the extreme in the sub-type of Bag Ladies, who tend to accumulate a great deal of wealth without any enjoyment (think of the stories you’re heard of the people who live like paupers and end up leaving several million dollars to charity when they die).  The solution is to slowly bump up the risk they take, to be better prepared for the future.

There’s a list of resources at the end of the book, providing a collection of material that could be useful to anyone who needs further information.

Pros

-More Individualized Approach to Personal Finance Advice: As mentioned at the beginning of this article, one of the strongest advantages of this book is the lack of a ‘one-size-fits-all’ attitude.  The book understands that all the readers are not the same, and attempts as best it can to tailor the advice in such a way as to be helpful for everyone.  While a book can’t hope to provide every single person with a unique plan for financial success, it does manage to differentiate significantly to help a wide variety of people.

-Interesting View of Money and Psychology: In a similar vein, too many books don’t take into account the effects of individual personalities and attitudes on how to handle money.  While some books cover the problems or goals for a particular group (get out of debt books for Debt Desperadoes, for example), a holistic approach for many different personalities is a bit of a rarity.  Getting advice on a variety of different money issues from both an emotional and monetary perspective helps to handle numerous different problems.

-Solid Financial Advice: It might seem like this book focuses on the mental aspect of using money, possibly skimping on the details of how to actually manage your money.  But, Goodman provides a solid foundation of money management and plenty of tools to help plan your financial future, from retirement planning figures to basic budgets, spread throughout the book.

Cons

-Sometimes Hard to Find Needed Information: Since the book is organized primarily according to the money types rather than the tools provided, it can be hard to find the budget tables (in the Striver chapter) or the investment return tables (unexpectedly, in the High Roller Chapter).  Given that many of the financial tools could be helpful to multiple types (there are several references telling one group to look in a different chapter for the appropriate tools), it seems like a better organization would be to put all the financial planning tools in one section, like an appendix.

-No Advice for Blended Types: Although there are early comments from Goodman about the need to consider that you may fall into multiple types and need to look at all aspects of your money type, the book doesn’t make this easy.  All the examples are solidly (and usually intensely) within one type and the book provides advice for only one type at a time, some of which contradicts the advice for other types.  A bit more advice for those who fit into multiple types (perhaps a section at the end of each chapter describing how to handle money for people with some traits that fit into another type) would be helpful.

-Too Many Resource Pages, in Too Many Places: At the end of each type chapter, there’s a list of resources specifically suited to that money type, and there is also an appendix that includes a list of general resources.  Many of the recommended books, magazines, and websites, showed up multiple times following the individual chapters, and again in the appendix.  Cutting down the number of places to list resources would make the book run smoother (and seem a bit less like an attempt to sell other books).

Overall

Master Your Money Type is a pretty solidly written book.  A few organizational changes would make the book a bit more useful, but it’s still useful and interesting.  Knowing your money type is an interesting point of view for money management, and it’s good to see someone looking at finances through a psychological perspective.  If you’re looking for a solid, unique personal finance book to help understand the basics, it makes a good introduction.

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“The only things certain in life are death and taxes.”  There are few guarantees in life, but these are two of them; you will die at some point (hopefully, not soon), and you will have to pay taxes.  Of course, with such inevitability, it was only a matter of time before someone decided to tax death.  (Or rather, the money left behind after someone dies; after all, as another old saying goes, “You can’t take it with you when you die.”)

The ‘Death Tax’ Explained

There are actually two different types of taxes that are commonly called ‘Death Taxes’: inheritance taxes and estate taxes.  To understand the difference, let’s consider a hypothetical example.  Your great, great uncle Jedidiah dies, leaving a large fortune (let’s call it $10 million dollars) in his estate, a goodly amount of which is going to you (let’s say that old Jedidiah left you one tenth of his final estate).  Of course, such a fortune is high enough to be taxed; the taxes could be taken in one of two ways:

While You're Visiting Angels, Your Family Might be Facing Taxes

Estate Taxes: Jedidiah’s entire $10 million estate could be subject to taxes, taking a substantial portion of the money in the estate before the money is disbursed to you or any other beneficiaries.  Essentially it’s a ‘tax’ on the whole ‘estate’ (witty, no?)  Since Jedidiah is gone, it falls to whomever is administering the estate, and there is usually a single rate applied to the entire estate after any exceptions or allowances are applied.

Inheritance Taxes: In this case, Jedidiah’s fortune isn’t taxed, but the amount that you receive IS taxed.  If the entire $10 million dollar estate is disbursed, your share ends up being $1 million, on which the tax ends up being levied.  Inheritance taxes also can differ according to whom is being taxed, with direct lineal relatives being taxed the least and non-relatives facing the greatest tax rates.

There are numerous similarities between the two taxes; both types usually exempt transfers to a surviving spouse as well as charitable contributions, for example.  (The federal government only levies an estate tax, although some states tax inheritances.)

Also, it’s probably worth noting gift taxes, taxes designed to limit the amount of money transferred from one person to another while they are both still alive.  A major reason that such taxes exist is so that Jedidiah (or other persons of means) can’t give away all their money before they die in order to avoid estate or inheritance taxes, which is one reason why they are frequently grouped together in legislation.

This year is a bit odd; for 2010 (and only 2010, barring any Congressional changes to the current policy) the federal estate tax has been repealed.  It’s scheduled to make a come back in 2011, meaning that this year is likely to have some debate over whether it’s better to allow the tax to reinstate or eliminate it permanently.

The Cons and Pros of Estate and Inheritance Taxes

If you’re a long time reader of The Amateur Financier (or any personal finance publication), you probably realize that there’s going to be some argument of whether these taxes are good or bad.  For a change of pace, let’s start with the cons first:

-Inheritance or estate taxes may reduce the incentive to save.  If Jedidiah knows that up to half of his fortune will go to the government rather to his heirs, he might not make as much effort to gain more money.  Essentially, it’s the same argument against excessively high income taxes; if the tax rate is too high, the amount of income (or bequest) needed to get a net increase isn’t worth the time and effort.

-These taxes are also a form of double taxation; every dollar that gets passed onto your beneficiaries must have been earned and taxed already, so the estate and inheritance taxes are at least the second round of taxes to which the estate is subject.

-The tax adds to the complexity of the tax code.  As with any type of additional tax, there’s added paperwork and red tape to go through.  Add in the numerous ways people try to avoid the tax (by giving away their fortunes, for example) and the counter measures the government adapts (like the aforementioned gift tax), and soon the tax code gains another few volumes.

-Lastly, the argument is made that death is not the appropriate time to be collecting taxes.  The term ‘death tax’ that’s frequently attached to these types of taxes is used by many opponents to emphasize the improper timing of such taxes (and arguably, the wrongness of the tax in general).

That’s quite a list of arguments opposing inheritance and estate taxes.  Of course, if those were the only arguments, these taxes would already have been repealed.  Let’s see what’s the proponents of keeping such taxes have to say:

-Since the taxes typically fall only on the wealthiest estates (those in excess of the 1 million dollars as of 2011 assuming that the tax is reinstated), the tax is progressive, only affecting the wealthiest individuals in the country.  Many proponents argue that’s it’s a reasonable way to ensure that the overall tax system is progressive as well, preventing the wealthiest individuals in the country from dodging taxes altogether.

-Estate taxes can increase the motivation to accumulate wealth.  Though this seems like a direct contradiction of the first ‘con’ above (and it is), the fact is that different people have different motivations and will be affected differently by the existence of an inheritance tax.  One wealthy person might be demotivated near the end of their life, not wanting much of their estate to go to the government, while another might look at the tax as an obstacle to be overcome on the way to giving the amount they want to their beneficiaries.

-There’s also an argument made that the estate tax is ‘fairer’ than many other types of taxes.  Since it’s levied after the person who originally earned the money is deceased, taking money from heirs who didn’t materially contribute to earning it seems more justified.  (Opponents of the tax would argue that the government has no more (and probably less) claim on the money than do the heirs.)

-A final justification for the estate tax is pretty simple; it brings in money to the federal government.  The Center on Budget and Policy Priorities puts the ten year cost of eliminating the tax beyond 2010 at $1.3 trillion, money that will have to come from other tax revenue or be eliminated from spending (or, given how our government tends to handle such situations, just added to the deficit).

With so many different aspects to the estate tax, both in favor and opposed, it’s hard to make a blanket statement about whether it’s better to keep it repealed or reinstate it.  Not that will stop any number of commentators (myself included).  Personally, I’m inclined to think that the good outweighs the bad, although I’m betting I’m missing part of the story.

Did I miss any major effects (positive or negative) of the estate or similar taxes?  Do you think the estate tax should remain repealed?  Do you expect (or hope) to be wealthy enough to be affected by the estate tax when you pass on?

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Previously, in our Wacky Wednesday hi-jinks: You’ve rented a time machine and attempted to profit by investing money and coming back two hundred years later to spend the profits.  The plan worked; your measly one thousand dollars had become more than 4.8 BILLION dollars; unfortunately, inflation has taken such a toll that this amount is about the cost of a used hovercar.  (”The Pinto Mark XIII, now with non-exploding hoverpods!”)  It takes several Reagans (one million dollar notes, so named for the late twentieth century president on their front; whether this is an honor or an insult, you don’t yet know) just to buy a cup of coffee.  Realizing your error, you run back towards your DeLorean shaped time machine, only to find it being towed away…

You wave and shout to get the tow truck men to stop, but they give you a dismissive shrug, make a few comments about ‘work is work’, and continue to haul away your only way to get home.  Eventually, your shouts and curses, (and the tears welling up in your eyes) convince the driver of the hover tow truck thing to give you a lift back to the rental place.

As you climb into the cab of the hovering tow truck, you wonder why everything in the future seems to be hovering.  After that, you wonder what you should do from here.  You don’t have much more money (adjusted for inflation) than you had back in early twenty-first century, but you’re in the FUTURE!  You could go on adventures on the moon or join a Star Fleet crew, visit strange solar systems, and sleep with green women (or men; far be it from me to judge you).

As thoughts of space flight and glorious science fiction adventures dance through your head, you look out the window to get a better view of this strange, new world.  You’re greeted by a bunch of billboards (floating, of course; you wonder if there was a law passed in the twenty second century that absolutely everything had to float or what).  After adjusting your eyes to the garishly designed billboards, you manage to make out some of the things being advertised.

The first sign you make out seems a bit odd; non-artificial strawberries on sale, 500 grams for 200 Reagans.  You’re still getting used to this whole future currency, and the metric system always gave you trouble (and you don’t even want to guess what the whole ‘non-artificial’ comment means), but it sounds as if a carton of strawberries is selling for the 2010 equivalent of two hundred dollars.  They certainly sound rather precious.

A few more billboards continue to erode your confidence that this is not the fantastic future for which you were hoping.  An assortment of ‘food pills’, living tubes with huge monthly rents, and ads for ‘One of the Last Remaining Forests’ make the future seem less utopia and more distopia.  It isn’t until you see the billboard for ‘Soylent Green’ that you finally decide you’re much better off back in the past.  You’re not sure if it’s some kind of twenty-third century joke or truth in advertising run amok, but you sure as hell don’t want to find out.

Now that you’ve decided to go back, you try to figure out how you can still profit off of time travel.  Clearly, depending on interest alone isn’t going to be enough to make you rich with no effort, so you may as well as see if there’s any way to make a Reagan or two off of your next time machine rental.

Unfortunately, most of the easiest ideas that pop into your mind just won’t work.  Trying to set up your own time travel travel agency would require a lot of work; getting the needed permits from the Time Police alone could take hours.  Ditto for exchanging products across time; while selling strawberries (and other natural products) in the future sounds like a great way to make money, you can’t imagine nobody else would try it if it was allowed.

Your mind briefly goes toward the idea of gambling.  While most forms of gambling disappeared shortly after time machines began being used commercially (the one casino that remained open was the site of the famous ‘Trump Debacle’; nearly one billion dollars won by ‘gamblers’ armed with future knowledge in the course of one day, leading to lawsuits for decades), there’s still the chance of passing information about future events to yourself before they went mainstream.  It’s just a matter of getting by those Time Police.  But come on, they can’t be everywhere (or everywhen) right?

You finally settle on your plan as you pull into the time machine rental place; travel back in time, pull your money out of the investment that got overtaken by inflation, pass it to another version of yourself along with some hints about future sporting events, and then distract the Time Police elsewhere.  Maybe you can try to kill Hitler; that always gets their attention.

You settle on your plan, and go up to the debit machine to pull out your money, to find that your account balance is empty.  Thinking it must be some horrible mistake, you vow to stay in the future just long enough to complain to your broker, when the full amount reappears in the account.  Still confused, but rather happy, you go to pull the money out again, when once again, it disappears without a trace.

Bewildered, you wonder just what’s wrong with the machine for a moment before it hits you; there’s nothing wrong with the machine, there’s a flaw in your plan: if you take the money out in the past, it won’t be available for you to use now in the future.  The only way you can have the money now is if you don’t travel back to take it out.  Frak!

How can you get around this paradox?  Will you be stuck in the future forever?   Does Roger like asking rhetorical questions as a way to wrap up these articles?  (Answer: Heck Yes)  Stay tuned next week (or the week after if I get busy again) for the next exciting chapter!

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Have you ever had a good idea, a wonderful idea you couldn’t wait to put into practice.  Then, before you had the chance to actually carry it out, you discovered that someone not only had the same idea, but managed to put it into practice before you even got the first step off the ground.  That’s pretty much the way I felt when I read this post on Evolution of Wealth.

The article itself is pretty reasonable, a round up of all the latest Yakezie posts, which is the sort of thing done by any number of blogs (including mine).  It’s what’s down in the comments that’s irking me; apparently, I’m not the first person to have the idea of using a carnival to promote the Yakezie challenge, and not being fast enough to get it up and running before anyone else, all I can do is wait on the sidelines.

Oh, well; running a carnival is a sometimes tough job, and I’m just glad that there are other people willing to shoulder that sort of responsibility.  I’ve already offered to host the carnival, so perhaps one week soon, you’ll see my weekly thoughts entry being replaced (or augmented) with a Yakezie carnival entry.  Either way would be pretty fun…

Enough about future round-ups, though; now it’s time to share some of the good articles from this past week:

Good Yakezie Posts

Debt Free News From a Debt Free Reader #6: Some good news to kick off our list; it’s always good when someone is able to get out of debt.  Go, Dustin!

How I went from No Blog to 122,661 on Alexa in Two Months: Not really personal finance, but another inspiring story nonetheless (particularly if, like me, you’re trying to make a go of this whole blogging thing.

Lease or Buy?  What to Know Before Your First Car Purchase: I’ve always bought used cars (and drove them until they couldn’t be driven anymore), but this is a good overview of the advantages and disadvantages of each car acquisition method.

Russian Women and Their Money: An intriguing view of how Russians traditionally handle money.  (It’s always amazing to me how many cultures have women controlling the purse strings.)

How Financial Planners SHOULD Behave and Act as a Fiduciary: A great list of things that a good financial planner should be doing for their clients.

Pros and Cons of Being Wealthy: Even with the cons listed, I’d still be willing to give being wealthy a try.

How to Get More Money Back on Your Tax Return: Apparently, it’s tax season in the great white north as well; here’s a list of tips aimed at Canadians (though there’s good advice for the US, as well).

Is Passive Income Real?: This guest post argues no (pretty persuasively), but I think that getting close to passive would satisfy me (and most people, for that matter).

Conventional Wisdom Leaves Much to Luck: Another guest post (they’re getting pretty popular, lately) about the flaws in conventional wisdom when it comes to retirement withdraws, and ways to protect yourself.

Combat the Closing Techniques-The Puppy Dog Close: One of the more diabolical marketing techniques (’Just take the puppy home for the weekend, you can return him if you don’t want to keep him’) and how to combat it.

BOND is Back!: Besides a great title line, this entry is filled with helpful information about a variety of different government bond types, from savings bonds to TIPS.

That’s pretty much it for this week; be sure to check the link in the first paragraph for an excellent collection of great articles (including mine).  Enjoy all the great personal finance reading!

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Happy CARD Day!  If you’re asking yourself, ‘just what the heck is Roger talking about?’, you’re in luck; in honor of CARD Day, I’ll take a few moments to go over the fun and joy of the CARD Act and how it affects you, and your credit cards, too.

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009, more commonly called the CARD Act (get it?  get it?) imposes new rules on credit card companies.  The rules are designed to protect credit card users from some of the more, uh, ‘questionable practices that credit card companies have used in the past.  A fact sheet goes over all the gory details of what is now longer allowed in the world of credit cards; a few of the highlights include:

-Restricting rate increases on existing balances.
-Contract terms must be constant for at the least first year of service
-Ends ‘double-cycle’ billing (when the balance from the previous month would be used to calculate the owed interest, enabling the companies to charge for balances that had already been paid off)
-Requires credit card users to opt-in before they can go over the limit on their cards.
-Applying payments over the minimum to the highest interest rate debt.
-Most sobering to anyone who keeps a balance, the credit card companies will also have to provide the amount of time needed to pay off the total amount owed if only the minimum payment is paid.

All told, a great victory for credit card users!  Take that, credit card companies!  Under these new rules, things are going to be much better for consumers; no more worries about abuse from credit card companies.  If a one or two major credit card providers have to go bankrupt, so be it.

Except…they haven’t, have they?  You may have noticed that American Express hasn’t packed up their bags and left town, nor that MasterCard didn’t tell their employees not to bother coming in today.  Heck, if you’ve been following the Olympics, you’ve probably noticed that not only is Visa advertising repeatedly, but they are offering the opportunity to win trips to every Winter Olympics in the future.  If these regulations are rein in credit card companies so much, how do they still have so much money.

Unintended Effects

As you might have guessed, the credit card companies haven’t spent the nine months since this bill was first signed (back in May of 2009) just waiting for the new rules to come into effect.  In the time they had to prepare, there have been signs of the credit card environment as it will exist under this law; higher interest rates, more fees, and less rewards.

It’s also harder for customers with low credit scores to get cards (or to keep cards when they don’t use use them often), and credit limits are being lowered for many credit card users.  Ironically, some of the people this legislation was designed to help may end up suffering the most by being unable to get any credit at all.

(All of this doesn’t touch upon one of the more controversial elements of the CARD act, preventing those who are under 21 from getting a credit card without either (a) proof of income or (b) a co-signer.  I’ve maintained that this is just common sense; if we were talking about 4o year-olds rather than typical college students, I can’t imagine it being a major issue.  The only reason college students get targeted by card companies is the assumption that the Bank of Mom and Dad will be around to bail them out.  Of course, there are those, like Stephanie of Poorer Than You, who might vehemently disagree.)

What to Do as a Credit Card User

What are you, the hapless credit card user, supposed to do?  For the most part, the same thing you should have been doing even before this act went into effect.  Pay off your credit card balance in full each month, don’t charge more than you can pay off, and work to pay down your debt as aggressively as possible.  Basically, the Commandments of Credit Card usage are still in effect.

You will may have to make some changes to your behavior as a result of the new rules, though.  With companies more likely to cut your credit limit or close your card, it’s important to regularly use all your cards in order to keep the accounts from being closed.  It’s also important to have an emergency fund other than your cards, as the credit line you are depending on may disappear just when you need it.  If you’re trying to build up points for rewards, also be sure to keep an eye on the rules; it’s possible that the number of requirements and restrictions will increase as companies try to maximize their profit levels.

Follow these precautions, the CARD rules will be nothing but good for you!

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• Saving Money with Your Credit Cards pt 1

After nearly a year of rising stock prices, with falling unemployment (albeit rather slowly) and higher than expected economic growth, there’s been a decided change in the commentary from many in the media.  The pitchforks and torches have been put away, and being an investment banker is no longer something you don’t mention out in the bars.  The question has begun to shift from “How do we recover?” to “How do we prevent this type of thing from happening again?”

One potential answer to the latter question is to start taxing financial transactions.  A financial transaction tax (or FTT, to save me some typing every time I mention it through the rest of the article) would be a small tax on most types of investments commonly traded, such as stocks, bonds, options, futures, and swaps.   The goal is to increase the stability of the markets by increasing the costs of buying and selling financial instruments, thus decreasing the volatility of the market (and earning the government a little money on the side).

The tax would be 0.25% on stock transactions and 0.02% on bonds, futures and swaps, with options taxed according to the underlying value of the security which it is optioning.  (Mutual funds would be affected indirectly; while mutual fund purchases or sales would not be taxed at the individual level, the purchases within the fund will be taxed, increasing the expense ratio.  I didn’t find any explicit comments on how ETFs would be taxed, but since they are bought and sold on the same exchanges as stocks, I would guess that the same 0.25% stock FTT rate would apply.)

This tax would be pennies on the dollar

The FTT is being designed to avoid affecting small investors as much as is possible.  In addition to the small amount of tax being considered, the tax as proposed at the end of last year would not apply to mutual funds (as mentioned already), pension funds, or retirement, education or medical savings accounts.  Further, the tax would be offset for small investors by a $250 tax credit, enough to offset the costs of investing $100,000 in stocks during the year.

National Effects

-Increasing the Cost of Trading: While the tax is on the small side, it will increase the cost of trading, particularly for large and/or frequent transactions.  Some of these costs will be passed onto individual investors regardless of the intent of the law; for stocks, this could mean higher trading costs at all levels, while it will mean higher expense ratios for mutual funds.

-(Possibly) Decreases the Amount of Short Term Trading that Occurs: The stated goal of the tax is decrease ‘churning’, rapid and repeated short term trading that adds little real value to the economy but increases the volatility.  Of course, how much of an effect such a tax will have is up for debate; compared to the costs charged by brokerages to buy and sell most financial instruments, the tax is rather negligible.

-Raise Tax Revenue: A study by the Center for Economic and Policy Research (CEPR) notes that this type of tax could generate a sizable amount of income.  Even with a fifty percent reduction in trading volume (cutting the amount of all financial instruments being traded in half), the tax could still raise more than $175 billion each year (over $350 billion if trading volumes remain where they were in 2008).  Granted, when the government routinely runs budget deficits in excess of one trillion dollars, even the most optimistic projections mean that this won’t be enough to plug up the deficit, but it represents one more source of funds available to the government.

Personal Effects

-For the Passive, Buy-and-Hold Investor-Not Much: As mentioned, the tax is pretty small; if you aren’t buying and selling repeatedly throughout the year, you’ll incur rather little in the way of FTT tax liability during the year.  Add in the exceptions for retirement and other tax-advantaged accounts and the tax credit to offset small investors’ expenses, and there’s a good chance that you’ll end up profiting from this tax.  The only real problem you have is that the expense fees of the mutual funds in which you invest will increase, as they pass the expense of the tax onto you.  However, as the Financial Adviser magazine notes, the increases will be rather small; actively managed funds will see an expense fund bump of 0.15%, while index fund fees will go up 0.05%.  At worst, that’s about a 50% expense fund bump to the lowest of the low index funds.

-For Active Traders-Could Have a Larger Impact: If you’re buying and selling multiple times in a month, a week, or even each day, the impact of tax will be much greater.  The cost of the FTT on a $1000 transaction is only $2.50, but if you do ten of those each day, two hundred days each year, that’s a total cost of $5000 each year that you’ll have to pay toward the FTT.  Of course, let’s put that in perspective; if you’re paying $5 per transaction each time you buy and sell stocks, you’ll end up spending $10,000 in commission costs, twice the amount you’d pay in the tax.  It will increase your expenses, of course, but that’s all part of the plan, to convince you to trade less often.

My View

Being a passive investor (as well as someone young enough to worry about spending much of my life paying extra taxes to cover the national debt), I like this plan.  It seems to be a pretty good method of raising tax funds, decreasing speculation, and encouraging a more passive approach to investing.  I approve.

(To be fair and try to give some time to the opposite side, here’s an argument against the FTT (or Tobin Tax, another term for this type of tax), although it seems to argue most strongly that building a ‘financial security fund’ from the FTT in order to bail out financial institutions in the future is impossible, because the government will spend it well before we reach another financial crisis.  You’ll get no argument from me there; but if we just pour the money raised into the general fund from the start, I still don’t see much of a problem.)

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As you may know (from reading Tuesday’s post), I’ve recently taken the GRE.  I did rather well, at least on the portions that were instantly graded (the Quantitative (Math) and Verbal sections; there are two Analytical Writing segments that need to be graded yet).  I received a 610 in the Verbal Section and a whopping 750 in the Quantitative section; since the GRE, like the SAT, is on a 200-800 scale, both scores are better than average, and the 750 is near the top.  Needless to say (although I’m about to say it anyway), I’m pretty happy with my score.

While I’m on the subject of good news, here’s another positive development: my fiancee Sondra had a gallery opening last night to display some of her wood working, and it went over very well.  Granted, the gallery was at her school, and she had to share it with the other people in her wood working class, and a good number of the people at the gallery opening were more interested in the food than the wood working, but still, it was nice to pieces she had worked so hard to complete on display as part of a gallery.

So, as I’m in a very happy mood and also filled with GRE related knowledge, I thought I would take a moment to share some of the tips and lessons I’ve learned about how to do well on standardized tests, like the GRE, the SAT, PCAT, assorted AP tests, etc.  This is hardly a be all, end all list to getting a perfect score, but should hopefully help you to boost up your score at least a bit if you ever find yourself forced to take one or more of these tests in the future.  Let’s begin:

1) Know the format of the test: One of the biggest advantages of standardized tests is that they are well, standardized.  This makes them easier for test makers to grade; feed them into a computer or hand the answer key to a grad student and before you know it, the grading is done.  It also means that you, the test taker, can familiarize yourself with the format of the test and the questions, so that the actual test seems similar to what you’ve already done.  You won’t know the questions ahead of time, but at least you’ll know what they should look like.

2) Use the Process of Elimination: Another advantage of the standardized test format to test takers is that most of the questions are multiple choice; the answer is listed right there on the test, you just have to determine which one is correct.  Even if you can’t come up with the right answer immediately, take a moment to eliminate ones you can obviously identify as wrong, and pick one of the remaining answers.  If you can eliminate three of the five choices on most GRE questions, for example, you can more than double your change of guessing correctly (from 1 in 5 to 1 in 2).

3) Pace yourself…: It’s easy on a timed standardized test to try to rush through the questions, moving as fast as you can to get everything answered.  Don’t.  You’ll do much better (and leave the test much less stressed) if you try to pace yourself, taking the time you have available to give yourself the time to think about the questions.   (This is especially true at the beginning of computer adaptive tests like the GRE; the early questions affect your final score more than the last ones, and the difficulty of the final questions depends on how you did on previous questions.)

4)…But don’t go too slow: If you’re a perfectionist (as I tend to be on tests), you might spend more time than you have available trying to answer a single question.  It can be hard, but sometimes the wisest course of action is just to take a guess, especially if you can easily eliminate a few of the answers to boost your odds.  You’ll score higher by finishing all the questions than by spending five minutes to get one right and either not answering or making completely random guesses on the last five questions.

5) Use the preparation material available to you: ETS, the company that does most of the standardized tests in the US (including all the ones I have listed above) has a pretty snazzy website that includes prep material, practice tests, and other resources to help you, the test taker, prepare for your exam, all provided for free.  In addition, there are any number of for profit test centers that put out guide books, practice tests, flash cards, and a wealth of other material to help you prepare.  (I’ve had good luck with the material from Princeton Review, but there are other groups as well.)  The more you practice, the better prepared you’ll be when the actually test comes around.

6) Relax: One of the most important, but hardest things to do when it comes to standardized tests.  Just take a deep breath, exhale, and remember that even if you don’t do as well as you’d like (knock on wood), you can retake the test at a later date.  It’s not the end of the world.

That’s enough advice to get you through most standardized tests; if you’re taking a test like this in the future, please drop a comment to let me know.  If there are any tips or tricks that I’ve missed that have worked especially well for you on these types of tests, please share them with me and my readers so we can learn from your experience.

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Today is going to be a shorter than normal collection of my thoughts, because most of my thoughts have been about things other than blogging this last week.  I am going to be taking the Graduate Record Examination (R), better known as the GRE, on Wednesday.  I’ve spent a lot of the past week studying various test prep materials, unfortunately spending less time than I would like on other things in my life, like blogging, spending time with my fiancee, and sleep.  (Just kidding on those last few, although not nearly as much much as I would like.)

Anyway, by this time tomorrow, I’ll be on my way to take the test.  I plan to do very well on it, then after spending the night attending my fiancee’s gallery opening, I’ll come home, relax, recover, and start tomorrow on blog posts for the coming week.  It’ll be nice to be able to search for jobs and work on my blog without worrying about how this test will turn out.

With all of that out of the way, I hope you’ll excuse the smaller than usual selection of quality articles from this past week; when I no longer have an upcoming test (and flashbacks to standardized tests from high school), I should have longer lists, filled with all the good articles I’ll catch up on in my spare time.

Good Yakezie Articles This Past Week

Should You Pay Off Your Mortgage or Your Credit Card? – At one time, this might have been an easy question, but changes in ethics (foreclosure is no longer a red mark) and the broader financial picture (many houses are underwater; why put more money in when you’ll never get any out?) have changed the answer for many people.

What Are The Definitions of Liberal and Conservative? – While not directly related to personal finance, it’s good to know these terms, which get tossed around rather loosely (particularly in an election year) really mean.  There’s also a link to a short quiz to find out where you stand.

Would You Sell Yourself for One Million (British Pounds)? – An interesting question, inspired by a British entrepreneur’s offer to sell 10% of his income from this point on in exchange for 1 million pounds up front.  (I would do so in a heart beat, although I doubt I could fetch anywhere near that amount; although, from what I gathered, neither could he…)

The Best Superbowl Commercials for 2010 – It’s probably already been well hashed out around the water cooler, but here’s a bit more fuel for the ‘Best Super Bowl Commercial’ Discussion.  (Although, I defy anyone to tell me that the beaver commercial for Monster.com was not absolutely hilarious.)

The 5 Worst Superbowl Commercials of 2010 – On the other, more horrifying side of the coin, we have th five worst commercials during this year’s Superbowl.  Sadly, there were many more that could be up for this reward…

Alright, that’s about it from me; it’s back to hitting the books (and the practice test screen).  Have a great day, and wish me luck!

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It’s Valentine’s Day once again, the time of year when everyone who currently is in a relationship does what they can to celebrate, while everyone without a special someone tries to do what they can to find someone.  Luckily for me, I have a sweet girl who happens to pretty easy to shop for on birthdays, holidays, and other gift-giving occasions.  She’s basically a female version of me (that is, a huge, gigantic geek), so I can usually just find something that would strike my fancy and get it for her.

Case in point, this year, I got her the complete Yu Yu Hakusho series on DVD.  For those of you who’ve never heard of it, it involves a guy who dies and is brought back to life in order to fight demons with newly acquired supernatural powers.  It’s filled with action, fighting, violence, and supernatural themes; this is what my girl wanted for the most romantic day of the year.  That’s true love there, being able to spend time with my beloved doing the geeky, dorky things that appeal to us both.

Alright, that’s enough for me.  I hope you all had a wonderful, fantastic holiday, preferably spent with the ones you love (romantically or otherwise) and had a wonderful Sunday.  Remember to keep love in your heart, and have a great day!

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Imagine working only one day each week.  Further imagine that during that one week of work, you aren’t putting in a full eight hour (or more) day, but instead, you’re only working four hours, max.  To top off, rather than going into the office, dealing with a horrible commute, gossipy coworkers, and bland coffee, you’re ‘working’ by checking into your business from an internet café in Paris, fitting it in between a tour of the Louvre and your weekly tango lessons.  Sounds like a dream, right?

Living that sort of life is the main point of The 4-Hour Workweek.  Timothy Ferriss writes about redesigning your lifestyle to ‘Escape 9-5, Live Anywhere, and Join the New Rich,’ as noted by the book’s subtitle.  He promises to help us design the lifestyle of our dreams, and make a decent profit at the same time.  But is it just hype, or can he really show us how to remake our lives?  Let’s read on:

Summary

The book starts with a short FAQ to quell some of the questions that likely popped into the readers’ heads upon reading the title and learning the purpose of this book.  The book then opens with a story of Ferriss preparing for a dance competition as an introduction to the main goal of the book: allowing the reader to design their own ideal lifestyle as a member of the ‘New Rich’ (NR, as it’s frequently abbreviated).  He introduces his method of lifestyle design, DEAL: D for Definition, E for Elimination, A for Automation, and L for Liberation.  Before getting into the details for all these steps, he provides a short chronology of his life, how he built a successful business that started to consume his life, and how he finally learned to automate it and escape.  Then we get into his plan for us:

D for Definition

The first part of the book sets up Ferriss’s definitions of New Rich, and how they compare to ‘Deferrers’, those who follow the typical plan of working, saving, and eventually retiring.  He stresses that though wealth is possible (even likely) following the NR plan in the book, the more important issue is having regular cash flow without needing to work long to obtain it, and using that money to fund your dream lifestyle.  The second chapter is about changing the standard rules regarding work and retirement, particularly when ‘Retirement is a worst case scenario’; that half a lifetime of work in exchange for the possibility to enjoy life when you are old is a poor deal.  There are a total of nine other principles Ferriss attempts to challenge, from asking for forgiveness rather than permission to money not being the answer.

The third chapter chapter is all about dodging bullets, defining the worst that could happen if you follow this plan, and how to get your previous life back if something fails.  It asks you to imagine the worst situations you could find yourself in if you followed the advice in the book, in an attempt to show how easy it would be to recover.  The fourth chapter is called ‘System Reset’, and is all about reorienting your perspective to achieve the (seemingly) impossible.  It introduces ‘dreamlining’, the process of writing down your dreams and creating time lines with actionable goals in order to meet those dreams.

It’s also the first chapter than ends in a comfort challenge, where Ferriss encourages the reader to do a number of tasks that most people would find uncomfortable, in order to help them ‘develop the uncommon habit of making decisions’.  The rest of the chapters in the book end with a comfort challenge, ranging from making eye contact on the street (Chapter 4) to asking for the number of several attractive strangers (Chapter 6) to laying down randomly in the course of the day (Chapter 11).

E for Elimination

The next part of the book covers how to eliminate unnecessary activity from your life.  Chapter five focuses on Pareto’s law, the concept that twenty percent of your effort will result in eighty percent of your results.  The recommendation is to cut out the less productive portion of your effort (the 80% of your efforts that result in only 20% of your results).  It also brings up Parkinson’s Law, where tasks swell to fill the time allotted to complete them; the suggestion is to cut down the time allotted to the minimum in order to increase productivity.

Chapter six is rather short, which is appropriate for its subject: limiting information intake.  The message is to cut down on the amount of information absorbed, whether from books, newspapers, magazines, or the internet.  Chapter seven is about cutting down the number of interruptions and pointless tasks you have during the day.  It suggests ignoring unproductive information (meetings, phone calls, and email) as much as possible and dealing with vital information in batches.  It also suggests empowering employees so they can make decisions on your behalf without needing to contact you for relatively minor issues.  If you don’t have any employees, don’t worry, we’ll cover that next…

A for Automation

The next section of the book is all about automating your life and your income, allowing you to enjoy life without as many worries or troubles.  Chapter eight is all about outsourcing your life; it highly recommends getting a virtual assistant (VA), someone who can manage many aspects of your life via the internet.  The chapter expands on the concept of VAs, creating a step by step description of how to find a VA (or a team of VAs), whether to choose someone in a Western country or the developing world, and what sort of tasks they can handle.

The next three chapters cover the steps of how to create an ‘Income Autopilot’.  Chapter nine is about finding your muse; finding a niche to which you can sell and then choosing a product to sell.  You could resell a product, license a product, or create a product of your own, as long as it meets the need of your market.  In chapter ten, you microtest the product to ensure that is a demand, building websites, testing ads, and otherwise using low cost methods to test the waters to see if there is any desire for what you intend to sell.  Finally, chapter eleven focuses on how to remove yourself from the equation; when and how to shift management of the daily function of your operation onto others.  It also provides tips on how to smooth the transition and minimize problems as you work to make the business self-sustaining.

L for Liberation

The last section of the book focuses on how to escape from the office.  Chapter twelve covers how to slowly get your boss to allow you to telecommute, starting with a day or two each week (or a one or two week trial period), and gradually increasing your time out of the office until you never step foot in the office, and instead do everything remotely.  The focus is on using your improved productivity (from the Elimination part of the book) to get your boss to agree to the remote working arrangement.  If that doesn’t work, there’s always plan B: chapter thirteen is about killing your job, and mainly provides counterarguments to some of the major reasons that people don’t want to lose their employment.

Chapter fourteen provides one way to use your new found freedom from the office: mini retirements.  These are short periods (one to six months) of relocation, usually to another country, with the goal of living life to the fullest while you’re still young, and making them a regular part of your lifestyle.  The rest of the chapter covers the details of how to make such a trip work, including a countdown of how to get your finances, household, and important documents in order for an extended stint away from home.

Chapter fifteen provides more information on how to fill your time and feel fulfilled when you no longer have to work.  The suggestions range from learning for the sake of learning to helping various service focused charities.  The sixteenth chapter is a list of 13 mistakes made by the New Rich, including working for the sake of work and losing sight of your dreams.  The final, unnumbered chapter is a poem by David Weatherford, reminding us to slow down and enjoy life.  The book ends with a list of some recommended reading material and a list of further content provided on the accompanying websites (some of which seems a bit racy, but that’s a separate issue).

Pros

-Interesting, Unique Perspective: This book has a very refreshing perspective on money.  Rather than the typical money book, which makes the assumption that you’re going to be working for many decades before retiring to live off your savings, Ferriss tries to create a method by which you can retire much earlier, while still maintaining a standard of living as high (if not higher) than you had before.  It’s nice to see a fresh approach to personal finance, one which may appeal to those who feel ill served by traditional personal finance books.

-Good Sets of Resources: Each chapter provides a great deal of information to be used to complete the goals set out.  They all end in a ‘Questions and Actions’ section that provides next steps toward achieving a 4 hour work week.  There’s also a list of other resources (almost all online) at the end of nearly every chapter.   Even if you aren’t completely sold on the lifestyle described in the book, many of the suggestions could still be useful, from eliminating extraneous information to hiring a virtual assistant.

-Humorous and Entertaining…: The book is very entertaining, and makes a rather easy read.  It’s interesting and involving, drawing you into the methods and means with a gripping tone.  There’s also a strong element of humor (much of it Ferriss poking fun at himself) running through the book, making it read more like an entertaining biography than a how-to manual.

Cons

-…But Sometimes Annoying: At times, the stories about his exploits get annoying.  Yes, given the point of the book, trying to design your ideal lifestyle, it does make sense to show what he’s done with his own lifestyle.  Still, it doesn’t stop me from wanting to hit him at various points in the books, usually after he’s described one of his adventures traveling the world.

-Most Applicable to White-Collar Workers or Entrepreneurs: The techniques described in this book, from enhancing your productivity in the office to telecommuting as a lifestyle, are virtually limited to those who work in the office, and frequently to those who have underlings to whom they can delegate responsibilities.  If you are in a position where your presence is physically required (anything from blue collar work to quality control), or at the bottom of the totem pole at your company, there’s a limit to what you can get out this book.

-The Lifestyle is Not for Everyone: Not just because you may not want to gallivant around the world or create businesses with the goal of automating them as quickly as possible (although, that certainly could be true).  But there’s a more basic reason: the lifestyle design espoused by the book requires a large support staff; at one point, Ferriss notes that his company requires 200 to 300 people to keep it running.  Simple math tells us that, even taking outsourcing into account, only a small portion of the population (a few percent, at most) can join the ‘New Rich’ before society ceases to run.  Just something to consider as you read through the rest of the book.

Overall

The 4-Hour Workweek is a bit like an overstuffed buffet.  There’s a great deal of information to be considered, much of it stuff I’ve never seen mentioned elsewhere.  Even if the overall buffet does not seem quite to your tastes, there’s probably something worthwhile to consider, from eliminating some of the distractions in your life to hiring a virtual assistant, that you probably haven’t considered.  It’s worth a read through, just to see the variety of ideas and new concepts that are suggested, in order to see if any can apply to your situation.

(Note: The version of The 4-Hour Workweek that I read and used for this review was the 2007 edition.  Recently (in December 2009) a new version, The 4-Hour Workweek, Expanded and Updated, was released, which touts over one hundred pages of new material.  I haven’t read this new edition as of the time of this post (although it’s on my to-read list), but as long as the general concepts are the same, I imagine this review will still be applicable.  Still, fair warning that there is a newer, potentially significantly different version out there.)

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Occasionally, I see something that just makes me think.  This article is one of those things.  In case you don’t feel like clicking through, here’s the executive summary: Karl Rabeder, who started poor and built up a fantastic fortune (3 million British pounds, about $4.6 million), has now decided to give all the money away: he gave (or is in the process of giving) all 3 million pounds he had accumulated to charities he had set up in Central and South America, although he’s not going to be drawing any sort of salary or compensation from those organizations.  His stated goal is to “Have nothing left.”

It’s not the sort of thing you see every day; in the modern world, there’s a great deal of emphasis on accumulating a greater and greater amount of wealth, rather than giving it all away.  Usually, if someone has such charitable leanings, they give only a portion of their wealth away, or wait until after they have died (and can’t use the money anymore, anyway).  To see someone voluntarily turn themselves into a pauper comes across as just plain strange; this isn’t helped when he says things about hearing words telling him to ’start his real life.’

Actually, giving away worldly possessions to find your true self isn’t a completely new concept, though; asceticism, the practice of depriving yourself physically in order to grow spiritually and in your religious beliefs, is a concept that has existed for much of human history.  Eastern religions, such as Buddhism and Jainism, have made the denial of worldly pleasures into major tenants of their faiths, and monks, nuns, and priests in most Christian sects practice varying degrees of abstinence (sexual and otherwise) to strengthen their faith.

Eastern Monks

But the ascetics differ from Mr. Rabeder in at least one important respect: they believe that money is a distraction from your spiritual goals because it can bring happiness.  Removing money and other possessions allows them to focus on the attainment of spiritual goals without the worry about possessions so many people seem to have.  In contrast, Mr. Rabeder has said, “Money is counterproductive – it prevents happiness to come.”  He clearly seems to think that, rather than bringing (earthly) pleasure as the ascetics (and so many other people) seem to believe, money instead blocks it.  Mr. Rabeder’s words caused me to start thinking: does money actually prevent people from achieving happiness and fulfillment in life?

My Thoughts

Money is many things.  I’ve given some of the reasons for people to want money before (and to want more of it than they currently have), and all are still valid.  In fact, that’s the primary reason to have money; it gives you options.  There’s many, many things you could do with $4.6 million dollars: fabulous spending sprees, great investment opportunities, and yes, giving it away to charity.

Money does have another side, of course; it also brings responsibilities and obligations.  Particularly if you are trying to ensure that your net worth keeps rising, then the time and effort needed to manage, maintain, and grow your money can be quite extensive.  It’s likely that sort of feeling that helped to motivate Mr. Rabeder’s choice in this matter.

That said, I can’t claim to understand Mr. Rabeder’s rationale completely; not being in his shoes, never having built a small fortune after I started from a poor background, I doubt I could ever fully understand him.  But, it’s his money, and if he feels that this move will increase his happiness more than spending or investing it, well, I hope that he is right.  Good luck in giving your fortune away to charity, Karl Rebeder, and here’s hoping that what you are seeking is easier to find once you no longer have so much money!  (Here’s also hoping that I don’t read about you being arrested for tax evasion or something similar; it would be a shame if such an interesting, oddly uplifting story turned out to be a ruse to avoid paying your share of taxes.)

What do you think of Karl Rebeder’s plan?  If you discovered, after working to build a fortune, that you weren’t any happier, would you consider (or even think of) donating it all to charity?  What sort of charity would you create to be funded by your millions?  Does anyone else want to give those monks a noogie?

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(As part of my attempts to ‘loosen up’ while blogging, I’ve decided to make my posts on Wednesdays into more humorous affairs.  It’ll be the perfect way to get over the hump while still learning a thing or two about money and personal finance.  Have fun while we discuss a perfectly legitimate (if rather far fetched) way to make a huge personal fortune.)

Let’s say you have a time machine.  No, don’t ask where you got it; that’ll just spoil all the fun.  How about we say that you got it at the local Doc Brown’s Time Machine and Mr. Fusion Emporium?  (Editor’s Note: I’m the first in line for a franchise when they start to expand.)

Once you’ve finished warning your past self of all the mistakes that you’ve made and how to avoid them, you’re both delighted and surprised to discover that you haven’t faded away after altering the flow of time.  (Or maybe your past self just didn’t listen; make a mental note to find a time when you weren’t out partying during which to pass on vital future information.)  You still have one trip left on the time machine before you have to return it, though, so what should you do now?

"Hi, I'm Marty McFly, and I'll be your chauffer for the evening." (c) Universal Picture

That’s when you have a brilliant plan; take advantage of compound interest to make yourself a billionaire in the future!  Yes, all you need to do is put aside a small amount of money now, allow it to grow for a few centuries, and you’ll be rich beyond your wildest dreams.  It’s the same principle of compound interest that inspires financial advisers to tell you to start investing early, but rather than waiting a few decades (and working the whole time to keep saving), you’ll simply skip ahead a few centuries and live like a king!  You’re not the first person to have this idea; it’s a concept known as the

Compound Interest Time Travel Gambit

and it’s been used in everything from Futurama to “The Restaurant at the End of the Universe”.  If time makes your investments grow, than more time must make them grow even further, and centuries would allow you to become obscenely wealthy in the future with only a tiny amount of money invested now.

You make up your mind, pull all the money you have left after your time travel rental out of the bank (a full $1000) and after a little bit of research at the time travel office, invest it in a fund that looks to have good prospects over the next two centuries.  You hop in the time machine, set the chronometer for 200 years in the future, and the gun the gas to get up to 88 miles per hour…

BAM!  You’re on a road that hasn’t been used in over a century, since cars no longer need to drive on the ground.  You head over to your brokerage, to learn how your fund did.  Your broker pulls out your files (blowing the dust off them in a comical fashion), and with a little bit of checking on her computer, tells you that your balance is currently over four billion (yes, billion with a B) dollars.  (It’d be around $4,838,949,585 if compounded at 8% for 200 years, for those who like exact numbers.)

After you recover from your fainting spell, you tell your broker to cash some of the fund out, so you have some spending cash to enjoy this strange new world.  You remember that inflation has been active the years you’ve been gone; at an average rate of 3.5%, it’s going to take $1000 to have the same spending power as one dollar when you left.  So, with one thousand dollars being the new single, you decide to take out a healthy amount to ensure you have enough; “Give me one million dollars” you ask, smiling broadly as you do so.

Your broker raises an eyebrow, selling off a portion of your investment, and handing you a single bill (one with a picture of Ronald Wilson Reagan on the front, you note with a bit of nostalgia).  You’re a bit surprised, but when you see the ‘$1,000,000, Legal US Tender’ written on the back, you decide the government must have started issuing much higher denomination bills rather than revalue the currency.

“Don’t spend it all in one place,” your broker calls after you, a rather weird thing to say.  You see a nearby coffeehouse, and decide to have a quick drink.  You order your standard double foam, extra tall, mocha chocolate vanilla low-caffeine chive tea, and watch as the cashier rings it up.

“That’ll be five Reagans,” she says, waiting patiently for you to pay.  You hand her the bill, waiting for your change.  She sighs, “That’s one; four more, buddy.”

You stare at her a few moments before the truth dawns on you; inflation has taken more of a toll on the value of your money than you thought.  Whether because a few jags of hyperinflation during the time you were gone or because of a trend of long-term higher inflation, prices didn’t increase 1000-fold; no, the world experienced 1,000,000 fold price increases, a process known in books and movies as

Ridiculous Future Inflation

As Lazarus Long, one of Robert Heinlein’s characters put it, “$100, put at 7 percent interest compounded quarterly for 200 years, will increase to $100,000,000 – by which time it will be worthless.”  (”Back to the Future” had an example that was even closer to home, predicting a Pepsi would cost $50 in 2015; if that comes to pass, I’ll be the first to admit that Obamanomics failed spectacularly.)  Cursing your lack of foresight (as well as wishing that you read/watched more science fiction before you went on your time travel jaunt), you head back towards your time machine, trying to think of how you can invest your money to become wealthy in the present (well, your present, which is currently the past…you know what, describing past, present and future when it comes to time travel gives me a headache).  But alas, your time machine is being towed; curses on repo men who can track you anywhere in the time!

Will you ever be able to get back to your own time?  How many Reagans will it take to rent a hotel room while you sort things out?  Will the Amateur Financier actually finish this story next week?  (Answer: Maybe)  Stay tuned for the next exciting chapter of Wacky Wednesday!

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It occurred to me as I was assembling my list of good blog articles for yesterday that several dealt with identifying or avoiding scams, either particular scams or the general concept of scams.  This makes sense; anytime is the perfect time for nefariously minded individuals to dangle the possibility of huge profits and giant returns to see who nibbles.  The only solution is constant vigilance, and understanding of how scammers work, in order to protect yourself.

In the spirit of informing the public of how to identify and avoid these types of nefarious schemes, here’s a quick primer to help you learn how to protect yourself and your money.  These are far from the only ways to reduce the possibility of finding yourself on the wrong end of the scheme, but they are a good start.  Follow these simple, largely commonsense suggestions, be careful and cautious, and you’ll be a much tougher target for scammers:

If it seems too good to be true, it probably is: If you can keep this one point in mind, you’ll save yourself an endless amount of scam related trouble.  One of the most common tactics used by scammers is promising results well beyond that of other methods, so long as you trust them and give them your money (or personal information).  If you know the sort of results you can reasonably expect to get through normal means, you’ll be able to recognize when scammers are promising more than they can possibly deliver.  Here’s some advice about ‘normal’ returns to help guide you:

-Investing: The usual figure cited for the long term return offered by a diverse large cap index (like the S&P 500) is 10% annually, including inflation.  That’s about the best you can expect from a ‘risk-free’ investment (and even that amount is far from certain in the short term, since the market is volatile).  If someone is touting an investment that returns much more than that amount, it’s either significantly riskier (as with things like forex or options) or they are flat out lying.  If they toss the word ‘Guarantee’ around as well, like ‘140% annual return, GUARANTEED!’, then run, don’t walk, as far away from the investment as possible.

Taking a chance on a potential scam is an even worse gamble

-Employment: When you’ve been out of work for a while, the ads you see like ‘Make $133 an hour from home, no skills required’ start to seem more and more tempting.  Keep a few points in mind though.  First, the amount you can reasonably expect to get from a starting job is around $10 an hour, at most; anything above that amount is likely physically hard (touting freight onto and off trains), requires special  training (computer programming skills or at least a college degree), or is generally unpleasant (handling trash).  Second, while work at home jobs do exist (case in point, I’m a blogger), most require you to start your own business (again, see blogging), rather than being offered by major corporations with high starting pay (particularly to people who haven’t ever worked for them).  Finally, any place trying to fill a job half that profitable won’t need to resort to paid ads (or pieces of paper on telephone poles); a few days on Monster or CareerBuilder and they would have more applicants then they could ever handle.

-Government Money: Yes, the government does provide money to people.  No, it’s unlikely that you’re missing out on any money that information from a late night infomercial will help you to find.  Especially since the most famous proponent of ‘Free Money From the Government’ just copied the whole thing, anyway.  If you really want to find government money, check online at any number of government websites; a little searching will yield all the information you need, ready and available (and for free, to boot).

Don’t Give Away the Store: Or your personal finance information, at least.  If you can keep information about your financial institutions, social security number, and credit cards from falling into the wrong hands, you can foil a lot of scams.  Remember, the only time you should even consider providing such information is when you initiate a transaction; if you are approached by an outside source, just say no.  Speaking of which…

ALWAYS avoid wiring money to people you’ve never met: Things like Western Union or MoneyGram are a good way to transfer money to family members who are difficult to reach otherwise.  But they are untraceable and unrecoverable, making them an ideal way for scammers to separate you from your money.  Unless you need to reach people you care about and have no other means of doing so, avoid wiring money.

Recognize (and know how to avoid) the most common scams: I’ve covered many types of schemes in depth previously.  For internet users, Advanced Fee schemes are common, convincing people to put up money up front to ensure a job or a share of a windfall.  Ponzi Schemes, where proceeds from future victims provide money to fund the returns of current victims and Pyramid Schemes, which depend on an endless amount of future victims, are also common schemes.  Be aware that not all sources of investment suggestions are completely benign; some hope to Pump and Dump stocks (especially penny stocks) after convincing you to invest in them.

Don’t Be Greedy: Probably the best advice I can give to help you avoid scams of all types is not to let a lust for wealth get ahead of your common sense.  Keep your head, be rational, and ask yourself a few pertinent questions, like ‘Could a company really stay in business and compete effectively if they pay tens of thousands of dollars to someone for glorified email sending?’ or ‘If I knew the secret to doubling my money in the stock market each month, why would I share it?’  That should help to put the crazy scams you read or hear into perspective.

Now, head back out into the world, and avoid those scammers, everyone!

More Resources:

The Federal Trade Commission’s resources for Fighting ID Theft and Fraud

Scambusters: Exactly what it sounds like, a website devoted to busting the most common scams

6 Tips to Avoid Senior Scams: Even if you aren’t a member of AARP, these are still some good suggestions to keep your money safe.

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More than one year ago (on February 6, 2009, just in case it ever comes up on Jeopardy), I started the Amateur Financier.  367 days, 335 posts, over four hundred comments (with probably one third of those being mine), and I’m still going strong!   Now that the Financial Samurai has caused me to start thinking about things like Alexa rankings and improving the visibility of my blog, I’m also glad to see that I’m the 582,563th most popular website there is (and look forward to reaching the number one spot soon! )  Thanks for watching, and here’s to many, many more years of great personal finance writing!

This being a Weekly Thoughts column, though, it’s probably time to get to some of the good posts from the past week.  Starting this week, though, I’m going to be making a few changes to the general format and method of doing these entries.  First, rather than picking five to ten good articles and writing a paragraph or so about what I thought while reading them, I’m going to choose more and write less.  I’m not going to go into a full list format, providing only the names of some of the articles that I liked with accompanying links as some bloggers do (I like to talk, or rather write, about my opinions too much for that), but a sentence or less with each article will probably be the extent of it.

I’m also going to be shifting my focus to my fellow Yakezie wannabes (at least the ones who are shooting for a 200,000 Alexa ranking; I’m not sure how much help the ones with significantly higher Alexa rankings already will benefit from my support), though I’ll still read, comment on, and share other bloggers’ achievements.  Anyway, onto the real fun: other peoples’ quality blogs:

Quality Yakezie Posts:

Sunday Morning Musing: On Money, Elitism, and Olympics – Just when did being elite get to be such a bad thing, anyway?

Job Hunting: Finding that Thirty Point Buck – A guide to job hunting that’s easier than finding that mythical monster buck.

Do “C” Students Deserve “A” Lifestyles? -  If they put other skills (sports ability, acting, or simply leadership) to work, sure.

Tried and Tested: Pay Yourself First – Compound Interest Rocks!

Rich Dad, Poor Dad Seminars a Scam? – Apparently so; Caveat Emptor (Buyer Beware)

Money Saving Tips that Happen to Be Green – Save the Earth AND your money!

Don ‘t Hire Until You See the Whites of Their Eyes – Leading and Lagging Indicators, and why I’m still unemployed when the market is rising.

The Millionaire’s Club – Always good to see another future member!

Why You Probably Shouldn’t Hire Outside Help – A good counter-argument to an often stated axiom: that we should hire out tasks when we could make more money in the time needed to complete the task.

Other Worth While Blog Entries:

How to Smell a Money Scam from a Mile Away – Just sniff for the stink!

The REAL Reason the US Should Wait Generations Before Oil Drilling – More Proof that Darwin is a Criminal Mastermind

Make Your Own Toothpaste – Exactly like it sounds, a recipe for making your own toothpaste, complete with pictures.

A US Debt That’s Unlimited? – How much of a problem is the US’s ever rising debt ceiling?

Public Storage: Problem Ignored – If the problem is too much stuff (or stuff that one half of a couple wants to get rid of) the answer is a yard sale (or compromise), not public storage, in spite of what the commercials would have you believe.

Where the Amateur Financier has been Featured:

A blog known as Ingathered (which seems rather new, from its Alexa rating) wrote an article about Teaching Game Theory to Children that referenced my blog entry on Irrational Escalation of Commitment.  That’s right, I’m starting to train a new generation!

That’s all for now; if I referenced your blog and you got a trackback, please drop a comment and let me know.  I’m try to tweak my trackback system, and the only way I can do so is if I know that it works.  Have a great Monday, everyone!

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The one year anniversary of when I started the Amateur Financier is coming up rapidly.  (It’s this Sunday, in fact; has a year really gone by this fast already?)  As I look back on my blogging career, short though it might seem, I can’t help feeling that I could be doing much better in my blogging career.

So, it was with great interest that I read about the Financial Samaurai’s Alexa Ranking Challenge.  (For those who don’t really get into blogging and the intricacies thereof, Alexa is a site owned by Amazon that analyzes websites and ranks them according to their impact; the smaller the number, the higher the ranking, and the more influence and impact the blog has.  Google, for example, has a rank of one, while my own humble blog has a rank around 580,000; check the badge to right to see the most up to the date number.)  FS’s challenge is simple: improve your ranking, improve your blog, and work to promote and support others as they attempt to do the same.

This sounds like a simply wonderful idea; it’s something I’ve been trying to do now for quite a while, but with more support, a ring of friends to help (and from whom to receive help), and tangible goals to meet (for me and my blog, that means getting my ranking under 200,000 by July 4th), I feel even more energized and motivated than ever before.  Plus, as an added bonus, he’s attempting to form a group called the Yakezie from everyone who can meet their goal, and that just plain sounds cool.  Look at their symbol:

The Yakezie Symbol

So, just how am I, Roger the Amateur Financier, going to break into the top 200,000 in Alexa rankings and become a master blogger?  I have a few thoughts on that issue already:

-Post 4-5 Good Entries Each Week: Too often, I’ve been in a big rush or otherwise unmotivated, and didn’t put quite as much time and effort into my blogging as I wanted.  No more; if I can’t come up with something worth writing, I’m simply not going to post anything. If I’m not forcing myself to come up with an entry each day, the ones that I do post should be of even higher quality.  And speaking of not posting each day…

-Take at least one day each week off from posting on my blog: Besides allowing me some time to enjoy life rather spending it in front of a computer, I’ll have a chance to catch up on blog reading, build up a buffer of ready to be published blog entries, and otherwise make things easier for me down the road.  Currently, I’m thinking of taking Saturdays off and moving my weekly collection of other personal links to Sunday, leaving the weekdays for ‘real’ blog entries and possibly guest posts.

-Try to write at least two entries each day: Why two?  That will allow me to publish one here on the Amateur Financier while having one in reserve for a buffer, for guest posts, for submitting to freelance writing sites, or any number of other purposes.  Plus, if I only achieve half of my goal, I’ve still written one post for that day, which isn’t too shabby.

-Write more guest posts, and accept more on this site: I’ve been reluctant to let anyone else post here, mainly for personal reasons.  From this point on, I’m going to try to accept one guest post each week (if anyone is wants to bask in the Amateur Financier’s glory) as well as submitting AT LEAST one guest post per week to other blogs.  I think my main targets are going to be the fellow would-be Yakezie members; after all, one of FS’s conditions for getting in is supporting each other, so why not start here?

-Read and comment on others’ blogs: I’ve been bad about this lately, and getting worse.  Besides building up some comment karma (that is, I comment on others’ blogs and I get comments in return), it’s not a bad way to put myself out there, get the name Amateur Financier on a variety of blogs, and maybe get a little traffic as a result.  Plus, I first got into financial blogs by reading, and I kind of miss being able to spend a whole afternoon just going through back posts on some of my favorite blogs.  Now that I’m not trying to write blog entries on Saturday, that will be a perfect day to go out and read some good blog entries.

There, that’s a pretty solid set of rules to follow; if I can do all that, I should be in very good shape, and will be a member of the Yakezie by mid-July.  Luckily, the Financial Samurai has assured us that nobody is going to remove any joints from our fingers; that would take a lot of the fun out of it.

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Last year, Pennsylvania had a rather nasty budget impasse.  It made national news, and generally annoyed every Pennsylvanian who would rather be famous for our delightful groundhogs than the intractability of our leaders’ political fights.  One way the politicians finally were able to work out a solution that appeased everyone (or at least shut them up long enough to get the budget passed) was to increase the state tax on cigarettes.  Various commentators, from the papers to NPR, referred to the cigarette tax as a ’sin tax’, which brings us to the obvious question: what is a sin tax?

Taxing Sin Done Right

Put simply, a sin tax is a tax on sin.  You probably guessed that, though, so let’s look a bit deeper.  The idea behind a sin tax is that there are some activities that we, as a society, consider undesirable.  Cigarette smoking is a common example, although things like using alcohol or even sugary foods and drinks have also been included or considered as possible subjects of a sin tax.  We could ban them outright, the way we with illegal drugs, but that costs a great deal of money to enforce and restricts people’s right to smoke, drink alcohol, or eat a Twinkie if they so desire (lump those rights all under ‘pursuit of happiness’).

What if there were an alternative, a way to keep something legal but discourage people from using it?  One way might be to make it more expensive; if the cost of a package of cigarettes goes up, a smoker is going to be less likely to purchase as many packs.  Adding a tax to cigarettes makes them more expensive, decreasing how many cigarettes get purchased and smoked (and generating income for the government, as well).

Sin, in convenient stick form

There are several advantages to sin taxes, particularly from the government’s standpoint:

-Politically Easy: Creating a (balanced) budget is hard, particularly when government spending is up and tax revenue is down (just look at the legislators in Pennsylvania).  No politician wants to be responsible for cutting a popular program, but no politician wants to raise taxes either, because raising taxes on a broad swath of the voting public is a good way to get unelected.  Sin taxes, which by nature only target a certain group of individuals, are a good way to raise taxes and keep your office, too.

-Profitable: Taxes do serve a purpose, of course; without them government wouldn’t be able to do everything that we ask of it.  (We can have a discussion of governmental effectiveness even with tax money to fuel it another day; today, let’s just focus on the sinning and the taxes.)  Sin taxes, as with any taxes, are able to provide the government with money, which of course means the government likes to have them as an option.

-Steer People Toward Good Behaviors: The difference between sin taxes and most other types of taxes is that sin taxes encourage better behavior from people.  By making the ’sins’ more expensive, people should logically choose to avoid them, opting for something less expensive and more sin-free.  If the government imposes a sin tax on bowling, for example, miniature golf could see a rise in participants; in the same way, the government can ‘nudge’ people away from whatever activities are considered improper.

All this sounds pretty good; why not get rid of those pesky income and sales taxes and simply tax sins to meet all our governmental spending needs?  Well, there are some drawbacks, as well:

-Makes the Government Dependent on Sinners: One problem with making a sin tax a major (or even minor) source of income is that the government then has a perverse incentive to keep people sinning.  As mentioned, Pennsylvania only managed to solve its budget crisis in part due to more revenue from smokers and cigarette taxes; if all the smokers in PA suddenly quit (or started bumming cigs from out-of-state friends), we’d be facing another budget shortfall next year.  Whether they admit it or not, this means that PA lawmakers need smokers to keep smoking (and paying taxes on) cigarettes; with that in the back of their mind, how hard are they really going to try to stamp out smoking?

-Can be Regressive: Since the taxes are the same on each pack of cigarettes regardless of the income level of those purchasing the pack, lower income people will end up spending a higher percentage of their money on the taxes than higher income people.  Two different pack-a-day smokers will spend the same amount in taxes (let’s say $1000, just so we have a number), but that represents a much larger portion of a $20,000 a year income compared to earning $100,000 each year.  (That’s before we even get into the argument that poorer people are more likely to smoke, drink or otherwise ’sin’ than richer people, making them more likely targets of this tax already.)

-Involves Government Regulation of Personal Behavior: Even ignoring the economic effects of the tax itself, there’s still the little matter that sin taxes involve the government deciding which behaviors are good and which are bad, and attempting to punish the bad ones.  Since these behaviors are personal and affect only the individual*, why should the government be able to dictate its preferences of how to act?  (*Alright, this is an oversimplification; something like smoking can impact people other than the smoker, through second hand smoke and the effects of smokers in health care plans, among other things.  There are alternatives that address those issues (rules about where smoking is permitted and higher premiums for smokers) without the need to resort to taxing all cigarettes sold, though.)

The Final Word on Sin (Taxes)

So where does all this leave us when it comes to sin taxes?  They’re probably here to stay.  Remember that first ‘pro’ point, ‘Politically Easy’?  That alone will ensure that some form of sin taxes stay around in some form for the foreseeable future.  Also, compared to some of the alternative methods of dealing with unwanted behaviors, such as banning them the way we do with illicit drugs, legalizing, taxing, and generating profit from ’sinful’ activities seems downright sensible.  Compare cigarette use to marijuana use, for example; which generates more profit for the government in the form of taxes, and costs less to regulate and control?

If I had just one wish when it came to sin taxes, it would be that governments wouldn’t depend so highly on them for income.  If the behavior is so sinful that we need to stop it, why should the government be in a position of depending on it for revenue?  I’d like to see politicians opt instead for the politically harder but less moral-twisting approach of getting rid of sin taxes and relying on other taxes to generate income.  If they do opt to continue the taxes, though, I’d love to see the money be funneled back into programs designed to truly eliminate the sin; not only do you get the sin tax money out of the general public coffers, but you deliver a one-two punch to whatever behavior you’re attempting to eradicate.

I’ll bet you a carton of cigarettes that that never happens, though.

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If you’ve been unemployed for an extended period of time, had frequent periods of unemployment, or simply held jobs that didn’t meet your needs or desires, you’ve probably spent a lot of your time job hunting.  I know that in the time since I graduated from college, that’s been a major part of my daily schedule.

If you’re like me, though, you’ve probably had periods where you just got tired of the constant searching for a job.  After all, job hunting can be just as hard as many jobs, without the perks of health care or being paid.  So, how do you move past these periods of no motivation and keep up the task of job hunting until you find new employment?  Here are a few suggestions to help you keep or regain that job hunting fire:

Just like job hunting, only with more shooting

1) Be sure to take breaks: You might be tempted to spend every waking hour looking for a new job, using as much time  as you can to find somewhere new to work.  Unfortunately, this sort of approach is counterproductive; while you might be able to keep up this pace for a short time, you’re likely to burn out if you don’t get a job in a few weeks, leaving you frazzled and unmotivated.  Rather than risk this sort of fatigue, limit how much time you spend job hunting each week.  Only do your job hunting during certain hours of the day (between nine and five perhaps, just as if you were working), take regular breaks from your computer to rest your eyes, and try taking a few days off each week.  As long as you are still putting in plenty of job hunting time, a short reprieve every now and then won’t have much impact on your prospects.

2) Try a different search method: A common source of job hunting fatigue is the repetition of doing the same job hunting technique over and over again.  If your job hunting methods are few, it’s going to be much harder to keep motivated over the weeks (or even months) that it can finally find a decent source of employment.  Rather than becoming a one-trick pony, try a variety of job hunting methods; break up emailing resumes with making follow up phone calls, or spend some time talking with other unemployed individuals to learn the latest job hunting techniques.  While we’re on the subject of other people…

3) Join professional groups: Joining professional groups can give you several advantages on the job hunting front.  You’ll have something more to add to your resume, you might have access to additional job hunting resources like group specific job hunting websites, and of course, the ability to connect with other people in your field to share ideas and job hunting advice.  If nothing else, it can give your people with whom you can vent when the job hunting gets tough.

4) Keep your job qualifications up to date: It’s hard enough to find a job in a slow job market when your skills are up-to-date and you are at the peak of your employ-ability, but try to do so when your skills are out of date, and it could be impossible.  Your best hope is to keep training regularly, going back to school for more education or attempting to boost your skills during your spare time.  Besides giving you new things to add to your resume, it’ll help you to expand your mind (a good goal in itself) and provide you with something to do while hunting for another job.

5) Look into other job possibilities: If you’ve ever wanted to do something different with your life,a period of unemployment provides you with the opportunity to retrain and turn your career path around.  You’ll have the time to take classes, study up on new technology, and get any other training you will need for your desired profession.  It’s an opportunity to remake your life if you don’t like the current direction in which it is going.  If you don’t want to completely change your life, unemployment is still a good time to try some new things:

6) Take up a new hobby or part-time job: Having free time during unemployment gives you the opportunity to explore your other interests.  You could take up a new hobby (I like blogging, as you can probably tell, but to each their own), spend more time working on your current hobbies, or try to find a way to turn your hobby into a source of money.  Goodness knows, there are enough freelancing and craft selling sites that it can prove pretty easy to monetize a variety of hobbies.

If you can’t monetize your hobby, there are alternate sources of money in the short term; you can get a part time job.  (Note: if you are currently receiving unemployment benefits, you need to be careful with part time work; be sure you know whether working will disrupt your ability to receive unemployment, and if so, be sure you take only jobs that pay more than you are currently getting in benefits.)  Admittedly, it might be hard to get a job in your preferred field; but you aren’t (necessarily) trying for a whole new career, just getting a part time job to help make ends meet.  You can get some money, and perhaps even remind you of why you like your previous job.

There you go, several ways to break up the boredom of job hunting.   Good luck in your job hunt, and hopefully, you find something soon.

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Happy Grundsow Day, everyone!  For those of you who aren’t Pennsylvania Dutch, that’s Happy Groundhog Day!  Apparently Punxsutawney Phil saw his shadow today, which in theory means six more weeks of winter.  Since it’s been snowing today, I’m willing to give the little fellow the benefit of the doubt; it does seem like plenty more winter is still to come this year.

I have a theory about Groundhog Day I’d like my readers to help me test.  I am a big Groundhog Day fan, and every February, I’ve heard quite a bit about the groundhog from friends, family, and the media.  My fiancée Sondra, who is a transplant from California, has absolutely no interest in the whole holiday, and has said that only Pennsylvanians care about Groundhog Day.  There seems to be some truth to this; the Pennsylvania lottery, for example, has Gus, the second most famous groundhog in Pennsylvania, as its spokes-mammal (with the implication being understood by everyone in state that the most famous one is Phil).  So my question is, did anyone from other parts of the country even realize that today is Groundhog’s Day, and actually care?

Alright, enough of my crazed existential quandaries; it’s time to cover the good posts from last week!

My Favorite Posts From this Past Week:

Getting Mad About Getting Paid – This is a completely foreign concept to me; getting mad because you got your paycheck early just seems silly.  However, as Lulu points out, if you’re living paycheck to paycheck and spending money as soon as it comes in, Getting your money that far in advance could be a problem, since it’ll be gone when your rent and other bills become due.  My advice: create a checking account to use as a buffer, so that you don’t have to cut things so close; living paycheck to paycheck is no way to live.

Someone Always Farts in a Crowd – I knew that I had to include this article from the Financial Samurai when I read the title in my feed reader; luckily for me (and also for you), it’s also a good, insightful piece.  FS discusses the concept of moral hazard, giving examples of how our financial (and health) systems are set up so that nobody is punished for their own bad decisions.  It’s kind of sobering to think about just how much passing of the buck there is nowadays.

Why 20-Somethings Hate Personal Finance – An interesting question, one that I (being a twenty-seven year old who (a) cares about personal finance and (b) writes about it for fun and profit) have a vested interest in figuring out.  MD of Studenomics raises several good reasons, but I think that he misses a big one: many of the traditional sources of financial advice, such as books and magazines, are aimed at people middle aged and over.  I can’t tell you how often I’ve read an article in Money or Kiplinger’s that gave advice for people at different ages, and the lowest age they start at is 35 or 40.  Maybe young people would care more if we didn’t keep acting like everyone under 30 can’t be trusted to properly manage their own funds.

How to Apply for a Peer To Peer Loan – I’ve had some experience with peer to peer lending through my Lending Club Account, but that’s been entirely as a lender.  The Silicon Valley Blogger shows how to approach things from the other side of the table, that is, how to get a loan.  It’s an interesting process, and while I hope that I’ll never need to get such a loan, it’s good to know how to get one.

Is Being Frugal Always Being Different? – I’m not that aggressively frugal (actually, Sondra and I were discussing earlier this week how we need to curtail our spending more), so when I read about fellow personal finance bloggers like Mrs. Money and the lengths they go to save money, I definitely sense a gap between us.  Apparently, she feels the same way, that she is different from the rest of the crowd; perhaps this gap will close eventually, though it could be a long time, I fear.

6 Questions to Financially Get to Know Each Other – An interesting little list of question designed to share some of the basics of your financial views, courtesy of J. Money.  It’s a pretty good introduction to you view and manage money; I’ll have to fill it out and share it with you all soon.  (And perhaps get Sondra to fill one out as well; it’s not a bad idea to know as much as you can about your future spouse’s spending/savings habits)

Real Hourly Wage, Visualization, and Your Finances – Finally, Mrs. Micah discusses how to calculate your real hourly wage (your take home pay divided by the number of hours that you worked) in order to put your spending into perspective.  It’s one thing to spend $20 on something, but a whole different situation when you stop and consider that the $20 represents two hours of work at the job you hate.  It helps to get a handle on what spending is and is not worth the effort you need to expend in order get the needed money.

That’s all for today; I hope everyone had a very merry and happy Groundhog Day (hopefully the little bugger is wrong and it’ll warm up soon, though).

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