Friday, October 28, 2011

Money thoughts of the week

  1. Dealing with investment accounts shouldn't be as hard as it is.  I'm trying to roll over a deferred comp plan from an old employer and am dealing with hold times, approval on the back end, emails, and plenty of forms that have to be faxed or mailed in.  If they can verify my identity online or by phone why can't I give them the rollover information that way?  That's 20th century innovation, not even 21st.
  2. I'm thinking about trying to get an investment management job for this summer.  Combine some of my passion for personal finance with my analytical, quantitative personality and experience.  As someone with no background in finance I don't know how possible this is but I'm going to try.  I think I'll be re-reading Benjamin Grahm's The Intelligent Investor and trying to find a few stocks that are undervalued so I can "pitch" if necessary (I also need to learn more about this process).  Advice, anyone?
  3. This blog is so not for the money and I don't think I'd have the time to truly grow it and monetize it in a worthwhile way even if I really wanted it to be a "business".
  4. I'm more and more convinced that moving to a low cost of living area post-MBA is the best way to get the most value out of the hours worked.  Plus these tend to be more laid back cities or towns (as well as work environments) which is more our speed any way.  Our very small sample size of totally unscientific research has shown that companies in no way come close to adjusting salaries to fully match disparities in cost of living and a couple companies (BCG I've heard is one) don't adjust salaries at all.  So perhaps the South or Southwest is in our future.  I'd be okay with that in many cases and have no desire to live in NYC post-MBA anyway.
  5. This is not directly related to personal finance but my theory that screaming hurts your bottom line is only being reinforced by conversations I'm having with other students here.  There are certain industries and companies (you know who they are) where this behavior is acceptable or tolerated.  I think it's driving young talent and productivity out the door and creating resentment towards the companies involved.
Thoughts on any of the above? What are you thinking about money this week?

Monday, October 17, 2011

Comfort makes you spend more

Of course now that I'm on the record about how sometimes my desire for comfort saves me money, I find an article highlighting research about the opposite.  An article from Wired's Frontal Cortex column describes research that concludes that people are willing to spend more and take more risks when they're in a comfortable environment.  The Wynn casino is a great applied example of this.  After redesigning their casino around comfort rather than obfuscation, the Wynn broke profit records and is still very successful considering its age. In one study students who were exposed to relaxing images and music were willing to pay about 15% more for all sorts of items.

This study makes me wonder if stress is actually good for my budget (in a very short term, bottom line sense).  Certainly I'm not relaxed when I'm stressed, avoiding the 15% over valuation, but I find that when I'm stressed I seek control on any front I can exert it, spending being one that is particularly a crutch for me.  I believe I do spend less when I'm stressed and in reciprocal, would spend more when I'm relaxed.  However, I don't know the extent to which this is a problem for me since I would say I naturally err on the side of under spending.  I would say my greater problem by far is a need for tight control of my spending when stressed.

Do you spend more when you're relaxed?  Less when you're stressed?  Do you think it should be an area of concern?

Friday, October 14, 2011

Food for thought

Freakonomics has an interesting discussion on grade non-disclosure policies at top business schools.  They're spot on that students have a huge incentive to keep things the way they are and I agree with the hints that grade non-disclosure does not improve academic learning.  Honestly, my sense of the policy in practice is that it allows students to focus less on classes and more on "networking" if you get my drift.  Companies accept it because top business schools have already screened heavily for students that are smart and work hard. 

However, I would say that (so far) students here are fairly diligent in their studies, just not as thorough or obsessive as they would be if their knowledge was graded. So MBAs learn something, just less than they otherwise would.  Not sure if this is necessarily bad given how busy we already are; something would have to be given up for extra study time.  For many this might be late nights at the bar for sure, but for some other students in my classes it would be time with their kids, church, volunteering, or exercising.  For me, I'd spend less quality time with my SO and less time cooking and exercising.  However, my sense is that for the former group this effect will only become more pronounced and the effects of grade non-disclosure become negative.


Thursday, October 13, 2011

Money is control

My thoughts on this subject vary widely from day to day and month to month but this weekend was so blissfully wonderful that it had me hankering for a permanent vacation from work.  I think I'd still be interested in school - I'm learning a ton and meeting phenomenal people - but it would be awfully nice to have no one to report to but my self and my family, no job search to worry about or career prospects to carefully manage.

Today my thinking is basically boiling down to money being a powerful enabler of control in life.  That day to day it can be a magic wand that makes so many superficial troubles like dirty floors, laundry or wardrobe fade away.  And, on a larger scale, there's a threshold that buys autonomy and freedom.  Of course, the more habitually you wave that magic wand day to day the higher your threshold for true freedom, but it is quantifiable and obtainable still.

The counterpoint is that money can also be a huge distraction for finding more meaningful, simple and elegant forms of control in your life.  Selling your soul to the highest paying job is worthless if you could be happy long-term in a lower paying profession that was a better fit for your interests, passions, and family. Forking over a huge sum for a downtown parking spot may tempt you to ignore commuting by train or bike or downsizing and living closer to work altogether.  Certainly like any other tool, when you get too used to using it to solve all your problems, all problems begin to look suited to it.

This is where frugality appeals to me.  I conserve money as a well of control to dispense at my leisure or need, but it also forces me to think creatively in solving problems that arise.  Without a habitual itch to buy my way out or the will to do so, there is no longer a one size fits all solutions to my problems.  My dirty floors, laundry, and faded wardrobe will be addressed through a patchwork of creative solutions until I find something systematic or serendipitous to solve the issue.  I'm a sucker for a challenge and, let's face it, these are tractable problems to solve.  The indirect means of control actually satisfy me more than the direct.  The ability to save money, build a control reserve, at the same time is not all that is attractive to me.

What do you think?  Is money a proxy for control in our society?

Tuesday, October 11, 2011

Notes on budgets

Let me be explicit here and for the record state that we don't have a budget.  I don't have a budget.  Sure I check in on my spending once and a while and I have an idea of how much money will go to general categories of expenses but I don't have targets for each months much less a written budget or an Excel sheet.  I don't worry about blowing a budget I just worry about spending imprudently.

Anyway, there's definitely a fairly consistent level of spending around here. Between the two of us it's a grand total of low $2k-2.5k a month-ish.  There's a lot of variance, but that's the ball park we've averaged over the last couple years.  So we're solidly under $30k a year, closer to $20-$25k.  With that as context, I found this note from ERE pretty interesting:

The Wheaton Eco-scale explains this in a brilliant way. Consider people living at different budgets, e.g. $100k, $80k, $60k, $50k, $40k, $30k $20k, $15k, $10k, $7.5k, $5k, $2.5, $1k, and $0k. Now, what Wheaton observes is that people who spend one or two levels below you are inspiring to you in terms of budget reductions. People who spend three levels below you are slightly nutty and people who spend four or more levels below your are crazy or downright extreme. This holds no matter where you are. If you spend 60k, then 50k and 40k is inspiring, 30k is nutty and 20k is crazy. If you spend 30k, then 20k and 15k is inspiring, 10k is nutty, and 7.5k is crazy. Conversely, people who spend at levels above you are considered prodigal or wasteful.  Early Retirement Extreme

I'm seeing this on two levels.  First, and most obviously, some of my classmates' spending is slightly eye-popping to me.  $60 party ticket plus another $60 in drinks and a $25 cab ride makes for an entire month's worth of going out spend for me (or more), but is a regular night on the town for a more than a few folks I know.  And I am completely guilty of judging them.  Can't say I'm proud of it, but I definitely do judge.  Never mind that many of these same kids are sponsored by their employers or are eligible for reimbursement if they go back for two years.  That's potentially $50,000 a year less in tuition that they're on the hook for.  That buys a lot of parties.

On the other hand right now I'm not sure how I would further reduce our expenses, much less be able to Jacob of ERE's $7,000 a year budget.  For two the budget becomes $14,000 a year, just under $1,200 a month.  And he's paying out of pocket of his own health insurance.  We'd have to slash an average of $800 a month to get there, possible if we stuck to very bare bones and had no surprises or irregular expenses.  But that seems completely unrealistic and, to be honest, completely miserable to pursue for us.

I imagine many of my classmates might say the same of my budget.  So while I'm not making any changes to our spending (there's neither the time nor the energy right now - I'm giving us twenty thumbs up for pretty much maintaining) it does have me thinking about what we consider possible versus ridiculous in our spending and in our lifestyle as a whole. 

What would be a budget or spending level you'd consider crazy?  Wasteful?  Do you judge others' spending habits?

Wednesday, October 5, 2011

$50 529 bonus

Just wanted to let you guys know about some free money for college or grad school that's available right now.  College Advantage, the Ohio 529 provider, is offering a $50 bonus for new accounts through November 18th.  You have to open with at least $100 which has to remain in the account until after March 15, 2012 at which point the $50 bonus will be deposited.  This works out to a 100%APY since you get a 50% return in six months.  $50 isn't a ton of money but it's free and a good excuse to start saving for anyone who's been procrastinating.  I've had an account with them for myself for around two years now started with a previous bonus offer and I have no complaints.  I've been in a Vanguard bond fund that's done quite well.  So no bonus for me this time (nor referral bonus), but I thought this might be helpful.

From their website:
Don't miss our $50 bonus offer when you open a new CollegeAdvantage direct account with a minimum $100 initial contribution. Promotion code PLAN will automatically populate the enrollment application when you click through here to begin the enrollment process. Offer ends November 18, 2011. Note: The $50 bonus contribution will be applied on or about March 15, 2012. View $50 Bonus Offer Rules.

Tuesday, October 4, 2011

My latest money-saving technique is... comfort

We all know how money can buy us creature comforts, but lately I've been finding that craving comfort has been saving me money. Like my laziness, I've been finding benefit to another vice.

I've been wearing an old pair of beater shoes that I got for $10 to walk to work instead of my expensive (relatively speaking) dress shoes.  The old pair of shoes is super comfortable and probably better for my feet to walk in too.  The dress shoes hang out under my desk full-time unless there's a special occasion. So I'm putting my walking miles on a pair of shoes that don't have to look great, were bought at a lower price, and would be cheaper to replace than my dress shoes, but the impetus was totally comfort. 

My SO and I spent some time last night mending our fitted sheet which had about an 8 inch rip in it instead of buying new.  The sheet has been washed so many times that the material is pretty thin but it's also super soft.  Those sheets are seriously the best thing I've ever slept on.  I can't bear the thought of giving them up so my SO and I split the work of stitching up the rip while drinking some wine.

We decided that our summer vacation would be close to home this year instead of involving a cross-country or ocean flight.  There's a huge cost savings there of $500 per person, but honestly a big factor was that two hours in car to drive to a nearby campsite is way more comfortable than a six+ hour plane ride with no food, no leg room, and no control over who you sit with.

Does craving comfort save you money?  Where does it cost you money?

Monday, October 3, 2011

Best of Money Carnival #123

I'm honored to be hosting the Best of Money Carnival.  I really enjoy this carnival since it's all about finding the most useful and well-written content out there in a week.  So with out further ado, here are my picks of the week.  Hopefully you find something that's useful for you, because I was very impressed with all of the submissions this week.

10.) Neal Frankle presents Balloon payment mortgage ? Good or Bad Idea? posted at Wealth Pilgrim. If you are asking yourself , "should I refinance my mortgage or buy property now?”, you’re smart to consider all your mortgage alternatives.

9.) Trent Green presents Invest Successfully in Stocks by Thinking of Companies as Money-Making Machines posted at Money for Regular People. At their core, well-run companies are simply money-making machines. This article reviews 3 principles to help you maintain that investor-oriented focus.

8.) FMF presents My New Credit Card Strategy posted at Free Money Finance. 6% is the new 2%! Here's how I make 5% to 6% cash back on the majority of my credit card charges.

7.) Boomer presents Treating Your Marriage Like a Business (Financially) posted at Boomer & Echo. Fewer partnerships would end in divorce if the people involved would think more objectively about their finances and how they will handle them together. That means treating your business like a marriage.

6.) The Financial Blogger presents The Thing About Blogging That Most of us Forget posted at The Financial Blogger. For some reason we tend to forget this one thing... [I'm guilty of this...]

5.) Robert presents The Wedding is Important, but the Future is Vital posted at The College Investor. An important look at saving on the wedding to save for the future.

4.) Miss T. presents How to Give to Charity Without Spending Money posted at Prairie Eco-Thrifter. Many of us want to give to charity but it isn’t always possible to give money when you’re struggling financially yourself. This doesn’t mean that you can’t demonstrate your support in other ways.

3.) Evan presents I Feel Guilty Making Unnecessary Purchases posted at My Journey to Millions. I feel literally guilty when I even think about the action of purchasing items I don’t need. It is almost like buyer’s remorse prior to actually purchasing the item.

2.) Darwin presents Seriously, a 9% Risk-Free Return in 1 Month. Here's How posted at Darwin's Money. Here's how I earned a 9% return in 1 month - risk-free! This is a once per year opportunity that few people take advantage of! [This has saved me a bundle as well...]

And my hands-down favorite of the posts was..........

1.) Are You Seriously Committed To Saving, Or Still Committed To The Short-Term? posted at Smart On Money by Mr. Money. In today's current economic climate, luxuries of years past have been stripped away, such as two cars in the garage, constantly updated wardrobes, and state-of-the-art technology. But relatively speaking, are these really sacrifices, and do we remain tasked with having to sacrifice much more in order to survive impending economic calamity?

 Thanks to all the bloggers who submitted! Next week's carnival will be hosted by Squirrelers.