This blog is intended for educational purposes only. None of these posts are meant to give legal or financial advice. If you need advice you should consult an appropriate professional.

Sunday, December 30, 2012

society teaches you to be an employee

The typical path in the world today is to get a job working for someone else.  This is a fine path.  It can be secure in a way.  You don't have to go out and find clients, do self-employment taxes, or find benefits on the open market.  The only thing is it's one income stream controlled by someone else, and it ain't you.  I picture school teaching people how to do resumes, interview, and the like to be an employee.  These are valuable skills.  But there's just not much diversity.  Why aren't we taught to be capitalists who own the means of production.  Those are the true winners in capitalism.  Not the workers.  So pretty much everyone is taught to get a four year degree then apply for jobs to be an employee.  Dumb!  Heck we're not even really taught investing in public companies either.  That's something anyone can do if they have some money.  And you own the means of production. How cool!  We need people to start businesses.  That's how people have jobs to apply to, and the government has taxes to collect.  Even if you are primarily an employee I think it's good to try a little side gig to see if it takes off.  Hey you never know.  In fact that might be the best way.  Have the day job for the paycheck and benefits and swing for the fences on the side.  And if nothing else try to think like an owner.  It might change your life for the better.

Saturday, December 29, 2012

most people aren't free

Freedom is the ability to exercise your own will without interference from another.  Most people believe in freedom in concept but don't have it in everyday life.  Think about all the things that individuals can be imprisoned by. 
Job-This might be the biggest one of all.  Most of us have to work for someone else to make our way through this world.  It takes money to do most anything, and most of us get that money from working for an employer.  But how many of us are truly free and satisfied while we're at the grind.  My guess is not many, and I think current research backs that up.
Debt-This is when you owe money to some entity for student loans, a mortgage, a car note, credit cards, loan shark type businesses, you name it.  This robs the person who owes the money of their freedom.  That's why it's good to avoid debt at all costs.
Relationship-How many people are happy together?  Well hopefully everyone, but we all know that's not true either.  I think relationships have the potential to be really good.  I don't think God wants us to be alone.  Many people probably feel trapped by a bad relationship though.
House-Think of how many people are stressed out every month paying for a place to live.
Car-Having to take the car everywhere you go is annoying.  I prefer walking and taking the bus.  Let's face it though, that's not always realistic.  I do it when I can.  I keep the car for the times the bus is not convenient.
Government-It seems every passing year the government at all levels(city, county, state, federal)intrudes in our life more and more.
Possessions-We need very little on this planet to actually survive.  I think if most of us are being honest we know we have well above that level.  The less possessions the lighter you live.
Children-For those who want children I think that's wonderful.  I guess what I'm referring to is those who didn't plan well and ended up with 5.  Kids don't go back once they're here.
Pets-Pets are great companions.  They can tie you down also similar to children.
As I think about this it seems like this article is negative.  Well that's not my intention.  I'm just trying to call to your attention to things we might not think about regularly that can take away some of our ability to be free.  So what's the answer?  I really can't tell you.  Each person has to find their own way.  Maybe I'm writing this because I was thinking about it for a while and wanted to get it out of my head.  

Friday, December 7, 2012

car-lite living

America is in love with cars!  And the rest of the world is trying to catch up.  I don't see this as a good thing.  Cars are expensive!  I think it's one of the main reasons people can't get ahead financially.  I live a car-lite lifestyle.  If I don't have to drive I don't drive.  I walk and take the bus if I can.  A lot of people just think of gas as the main expense of owning a car.  Oh but it's much more than that.  How about maintenance, repairs, tickets, accidents, insurance, auto club, parking, just to name some big ones.  I understand that it's hard to survive without a car.  It seems the only place this is doable in the US is in the northeast which is very expensive to live overall.  I really would like to go car-free.  But there are times when the bus in my city is just not that efficient, so I keep the car for those times.  Personally I don't like driving.  I find it to be stressful.  You never know what those crazies are going to do on the road once you get out there.  There are a lot of lawsuits and settlements when it comes to driving too.  I wish we had better local, regional, and national public transportation than we do.  I do the best I can though.  If I can keep the miles off my older car I will.  Much of it is just a mindset though.  That's the part that's maybe the hardest to change.  I tell people I take the bus when I have a car, and they look at my like I have two heads.  There's also a stigma of not having a car which is totally stupid.  I wish the stigma was reversed.  I'm doing my best to minimize transportation expenses and ease the busyness of our roads.    

Wednesday, December 5, 2012

The one-legged stool

Retirement is something everyone has to prepare for in one way or another.  Traditionally there has been a three-legged stool which includes a defined benefit pension, social security, and personal investments.  I probably don't have to remind you, but defined benefit pensions are going the way of the horse and buggy.  It's too much risk and cost for employers so they heap those onto the workers nowadays with plans like 401k's.  These are called defined contribution plans because you are the one contributing.  Some do have an employer match which takes a couple years to become fully yours or "vested" as they say.  I think social security will be there for a long time, but not everyone agrees with me on that one.  There are many people that say don't count on it at all.  That leaves personal investments.  Scary isn't it!  Most people are not saving nearly enough to fund a comfortable or even a minimal retirement.  The trend is that we're more and more on our own.  We can't count on employers and government to take care of us like previous generations did.  And in my opinion I want to be less dependent on employers and government.  That's just my preference.  The more money you have socked away the more independent you are.  Compounding can do wonders if you start young and give it time.  There are people who have built portfolios of dividends coming in every month that don't need anything else.  It is possible although not easy for sure.  Concentrate on the one area you have control over: how much you invest for your future self.  If you do that well enough you might not need the other two legs.

Sunday, December 2, 2012

The "financial planning" field

Being an aspiring financial planner I've noticed something about the field.  It's mainly sales.  I think financial planning should be about planning not selling.  Now in order to get clients a planner does have to sell their services, but that's not unlike other professionals.  The job "opportunities" go something like this.  The company will support the future financial services worker during a get up and running period after which they cut them loose on straight commission.  The compensation models are basically commissions, percentage of assets under management, hourly or flat fee, and salary.  The most common of the jobs are commission based.  This to me strikes of partiality to the particular products the salesperson is pushing.  It's very hard to get started in the financial planning field for someone like me because so many of the jobs are commission based sales.  I think the best compensation model is flat fee or hourly with flat fee being my choice.  To find a salaried job as a financial planner starting out seems next to impossible.  Knowing myself I know I won't be successful facing this harsh world having to build my own book of business.  I prefer the safer path even though I'll make less.  What to do?  I think starting out at a bank or credit union sounds pretty good.  A credit counseling agency could work as well.  If somehow I could be a planner's assistant that's fee-only that would work too.  My hope is that I can find a place in this field of helping people with money because I think my message could be of use to them.

Tuesday, September 18, 2012

allocating capital

Allocating capital sounds like a fancy job.  All it is is telling your money where to go.  I look at it as much more than just investing.  Every expense I pay is allocating capital.  It you accept that definition then we all allocate capital.  We have to pay for housing, food, and transportation among other things.  So hopefully we try to find the best deal on everything we have to pay for monthly.  We can then send our money off knowing that it's getting us the best value for every dollar.  I enjoy having the internet.  I feel like I get a lot for the money I pay every month.  I therefore have no problem allocating capital in that area.  Electricity is another example.  To me I think it's cheap for what I get.  It would be very hard to live without electricity.  There's not much of a choice on that one, even so I don't feel bad allocating capital to pay for electricity.  The key with getting better with money is getting better at telling your money where to go.  The first problem is getting a sufficient income to pay all your bills and to have a surplus to put to work.  Once that is done then it's time to efficiently allocate capital.  Money is always limited even if you're a billionaire.  It's good to learn how to handle it at smaller levels even if you become rich at a later time.  So once you have sufficient income I think managing it better is something worthwhile to aim towards.  There are people who are living paycheck to paycheck even at high levels of income.  Of course it is easier to build wealth if you make more, but it doesn't happen automatically.  It's a conscious choice.  Even if you have very low income you can still build wealth with shrewd money management.  So the next time money is coming in or out of your account think of yourself as allocating your capital efficiently like a business.

Friday, May 11, 2012

paycheck mentality

Most of us work for a paycheck.  This is what we're conditioned to do.  We're taught to be dependent on an employer for our survival.  Not very entrepreneurial is it?  The higher the income the better.  So doctors, lawyers, and other high earners are what we are taught to be.  Aim to not need a wage check.  A lot of times we're judged on gadgets we own, our income level, our job status, not on wealth.  Wealth is net worth not income.  They are very different.  Wealth is like a stored reservoir.  Income is like a flowing stream.  Those that are truly successful in this life don't need a paycheck.  They have a source of income or wealth other than a wage.  That's not to say they don't still work for money if they want to.  But they have the choice at that point.  Realistically most of us will need a job for a good long while.  It's what you do with the income you get from that job that's important.  Remember everyone is trying to take it from you.  Be careful with it!  It's valuable!  It represents hours of your life.  Have that shield up.  Kick those sharks out there that are looking to bite you.  Be on your own side when it comes to money.  Buy assets that produce their own income with money from your job.  And yes starting your own business is riskier and more of a hassle than being an employee.  I guess what I'm talking about here is more of a mentality than a circumstance.  Think like a wealthy and entrepreneurial person before you become one.  Think in terms of value and profit, and think like an owner.  It might just produce some positive differences in your life.

Wednesday, May 9, 2012

emotions of money

Money can be an emotionally charged topic.  We all have certain feelings when it comes to transacting with money in whatever form.  I think one thing to keep in mind is trying to stay as logical and rational as possible when it comes to dealing with it.  People say these days that money is one of the few topics left that's still taboo.  I enjoy talking about it.  It's no big deal really.  Fear and greed are two big emotions to deal with when it comes to money.  Money is just a man made tool.  It's used to get stuff.  Nothing more nothing less.  It represents power, sexiness, strength, freedom, security, and many other things to many of us.  And I suppose it can be those things sometimes.  The whole idea of financial independence is to have a stream of income to pay your expenses without having a job.  That involves putting off pleasure today for a better tomorrow.  In other words saving.  I believe this relatively new field of endeavor is called behavioral finance which seeks to explain why we do the things we do with money.  Who knows really!  I'd say we all do things that others would not approve of with our own stash.  But it's important to enjoy the day too.  There's some kind of a balance that I'm still not sure of between spending and saving.  I tend to fall more on the miser side.  That leaves me more money to run my a/c if I want.  I'm aware though that when you bring up money around some people they don't want to deal with it or talk about it.  I guess they figure everything will work out on its own without a plan.  I'm not sure about that one.  I tend to be more of a planner when it comes to money for sure.  The best thing I can come up with is it's good to respect each dollar and enjoy the day.

Monday, January 30, 2012

status is dumb

Wanting others to know we've made it in this world is a powerful drive for many people.  It's silly really.  If we really thought about our decisions I bet many of them would be about impressing others in some way.  I live in a fairly high status neighborhood.  But I'm a stow away in my cute little garage apartment.  I wonder how many of the families living in those houses have real wealth though.  My guess is it's not many.  They're probably on the earn to spend treadmill.  And that's not a good place to be.  What's better to do is not care what others think of us in this world and build real wealth.  Is this easy to do?  Absolutely not!  We all want to be accepted by our fellow human creatures.  So expensive houses and cars really don't get you anywhere unless you're already rich.  Even then why not live modestly.  Status also extends to where people shop.  You can usually notice a certain type of clientele that's similar to each other when you walk into a place.  Yeah this a yuppie store or this is a hippie store.  That type of thing.  Always try to get the best value or some kind of deal for your hard won dollars no matter the level of the store on the status totem pole.  It doesn't seem like people talk about status much either, but it's very real.  I notice it all the time.  Some businesses sell steak, and some sell sizzle.  Give me the steak any day baby!  So fight this culture a little bit, and don't go along with this dumb status game.  Build real wealth, and enjoy your life.

Thursday, January 26, 2012

financial independence

Financial independence is a term that's used a lot today.  What does it mean?  I define it as having a source of income other than paid employment that covers ALL of your living expenses.  This is possible to achieve in a capitalist system.  Is it easy?  It most certainly is not.  I think most of us are taught to get jobs then spend all or more of our earnings on consumption items.  This is not the way to build wealth.  It's inevitable that we'll all reach a point where we're no longer able or don't want to work anymore.  Why not plan for it now?  So building capital of some kind comes to the front of the line if you want to be free from the grind.  The foundation to all this is to keep expenses lower than income always so your surplus is free to be employed to produce freedom.  Remember a consumption spending based lifestyle is a treadmill.  I'd rather jog outside.  Remember appearances can be deceiving.  The person with all the flashy stuff often has little real wealth, and they often are deeply in debt.  If you have a source of income today then it's possible for you to get on the path towards financial independence.  Start small.  Aim to pay a little bill with some sort of recurring income then repeat.  That's really all there is to it.  Enjoy the process.  Always think about ways to make an income that doesn't depend on you being in a particular location or showing up and trading hours for dollars.  Even if you never pull it off it's fun to dream.  You are only truly financially independent when you don't have to work for survival anymore.  Until then enjoy yourself.