Since Friday is TGIF day, the day when people make a mad dash to head off to one place or another, I thought I'd introduce a new Friday Feature that I will continue doing until I get bored or run out of stuff to say.
The Friday feature will be gambling. Every Friday, I will post information about some gambling-type activity. It might be a casino game, it might be a betting opportunity, it might be a "con" game or a street hustle, and it even might be a no-cost gamble, like game shows. Every Friday, I'll post about one type of gambling activity or another, and clue you in to a few things they may not mention in the helpful info for potential gamblers that's provided in the rooms in Vegas.
Why gambling? Because this is a blog about solving financial problems, and there are still a large number of people who think that gambling is their only hope to solve their financial problems.
In reality, they're taking the very money that could potentially get them out of debt--that little bit of extra money each month that could start them on the road to financial freedom--and handing it over to somebody else. A casino, a street hustler, or the state government.
I'm going to be preachy. I'm not going to argue that gambling is a sin. I'm going to try to shed some light into those darker corners the casinos keep special for hiding their dirty little secrets.
I won't post about any specific game this week--I just want to say something general about gambling--something I said once before.
If you gamble, you're probably not doing it to make money, even if you think you are. If it were really about money, you would have given it up after you realized it wasn't making you any.
There's probably some perfectly normal and acceptable craving that gambling fulfills. You might crave risk-taking. You might enjoy the little thrill you get from seeing a strategy you used work at the blackjack table. You might enjoy the endorphins that naturally flow when you put some stress on yourself and take a chance.
So all I'm asking you to think about is whether there might be some other way that you could fulfill that need that didn't consist of--in essence--handing your money over to somebody and then waving goodbye to him.
Friday, February 11, 2005
Thursday, February 10, 2005
A New Lease On Life
Is leasing a car a good idea?
It seems to be, doesn't it? The monthly payments are usually a lot lower, and there's nothing more important than that, is there?
Well, actually, yeah there is. See, the difference is, in essence, this:
When you finish the car-financing process, you own a car. It is yours, free and clear. You can sell it and make some money off of it, you can keep driving it without a car payment, you can do whatever you want with it.
When you finish the leasing process--well, you own nothing. You're done. In fact, you probably still owe even more money, like 12c a mile fees for going over mileage, fees for wear-and-tear on the car, etc.
In other words, you basically just rented. Only not only did you rent, but you financed the rent.
Imagine you wanted an apartment that normally rented for $750 dollars a month. Only instead of just paying $750 a month, your landlord made you guess how long you needed the place. You decided five years. Your total payout at that point would be $45,000.
So instead of just taking the $750 a month from you, the landlord says he'll "loan" you the $45,000 right now to pay the rent for the place for the next five years, and you can pay him back in monthly payments, plus 8% interest.
Your monthly payment would now become $872 a month, and you'd end up paying $9,313 in interest above your regular rental costs.
By "financing" the lease, this is essentially what the car company is doing. Charging you interest on what is, after all, just rent, since they own the car at every point.
Of course, at that point, they're willing to sell you the car--but you're certainly not going to get a bargain for it. Anybody will tell you the total payout for purchasing a car after a lease is greater than if you had just bought the car in the first place.
People think leasing allows the dealer to take the "hit" on initial depreciation. This idea, to put it bluntly, is insane. It's calling the grass blue and the sky green.
Leasing is taking the initial hit on depreciation. You are bearing the entire brunt of it, and not only are you doing it, you're paying interest to do it. When you're getting to the point where the guy who financed would start to see some equity, you're giving that machine up so you can go help the dealer pay the depreciation on the next car you lease.
So why are the nice men at the car dealership so eager to push leasing to you as your best and cheapest option?
I'll bet you can guess.
According to Dave Ramsey, who calls leasing "fleecing":
Car dealers know they can sell you on it, because they know most people think in a month-to-month, paycheck-to-paycheck mindset.
So am I saying you should finance new cars? Am I saying you should even buy new cars?
Not remotely. But that's another post.
It seems to be, doesn't it? The monthly payments are usually a lot lower, and there's nothing more important than that, is there?
Well, actually, yeah there is. See, the difference is, in essence, this:
When you finish the car-financing process, you own a car. It is yours, free and clear. You can sell it and make some money off of it, you can keep driving it without a car payment, you can do whatever you want with it.
When you finish the leasing process--well, you own nothing. You're done. In fact, you probably still owe even more money, like 12c a mile fees for going over mileage, fees for wear-and-tear on the car, etc.
In other words, you basically just rented. Only not only did you rent, but you financed the rent.
Imagine you wanted an apartment that normally rented for $750 dollars a month. Only instead of just paying $750 a month, your landlord made you guess how long you needed the place. You decided five years. Your total payout at that point would be $45,000.
So instead of just taking the $750 a month from you, the landlord says he'll "loan" you the $45,000 right now to pay the rent for the place for the next five years, and you can pay him back in monthly payments, plus 8% interest.
Your monthly payment would now become $872 a month, and you'd end up paying $9,313 in interest above your regular rental costs.
By "financing" the lease, this is essentially what the car company is doing. Charging you interest on what is, after all, just rent, since they own the car at every point.
Of course, at that point, they're willing to sell you the car--but you're certainly not going to get a bargain for it. Anybody will tell you the total payout for purchasing a car after a lease is greater than if you had just bought the car in the first place.
People think leasing allows the dealer to take the "hit" on initial depreciation. This idea, to put it bluntly, is insane. It's calling the grass blue and the sky green.
Leasing is taking the initial hit on depreciation. You are bearing the entire brunt of it, and not only are you doing it, you're paying interest to do it. When you're getting to the point where the guy who financed would start to see some equity, you're giving that machine up so you can go help the dealer pay the depreciation on the next car you lease.
So why are the nice men at the car dealership so eager to push leasing to you as your best and cheapest option?
I'll bet you can guess.
According to Dave Ramsey, who calls leasing "fleecing":
Smart Money magazine quotes the National Auto Dealers Association (NADA) as stating the average new car purchased for cash makes the dealer an $82 profit. When the dealer can get you to finance with them, they sell the financing contract and make an average of $775 per car! But if they can get you to fleece the car, the dealer can sell that fleece to the local bank, or GMAC, Ford Motor Credit, Chrysler Credit, Toyota Credit, etc., for an average of $1,300! The typical car dealer makes their money in the finance office and the shop, not in the sale of new cars.
Car dealers know they can sell you on it, because they know most people think in a month-to-month, paycheck-to-paycheck mindset.
So am I saying you should finance new cars? Am I saying you should even buy new cars?
Not remotely. But that's another post.
Wednesday, February 09, 2005
Trimming The Fat
So what am I doing to make this work?
Well, basically I've given up everything I don't need, both financially and physically.
Financially, these are some things that went:
The Gym (I lift weights at my folk's house and do cardio on the sidewalk and at home)
Cable (I get just local channels now, which is $5 a month from Dish Network)
DSL (Not that I ever had this, but I have $5.95 a month dialup with access4less.net.)
Memberships (I've been a member of a few organizations that required dues. Not anymore.)
Magazine Subscriptions (Got a couple to support a brother-in-law's fundraising effort. Won't be renewing them.)
Eating Out (Maybe a 99c cent chili or something, here and there, or if I have coupons.)
Buying Books (I have full shelves that can show you where I tend to blow those dollars that are burning a hole in my pocket. Thank heaven for libraries.)
Diet-wise, these things are no longer a part of my diet:
Liquid Calories (No milk, no sodas, no punch, no nothing. Not even diet. I used to drink a Sobe a day until one day I noticed the ingredients and nutritional info were the same as for Mountain Dew, and they cost twice as much. Just water for me, thanks.)
Eating Out (I used to think I was doing my body a favor when I'd order two double-doubles instead of getting fries and a soda, since fries had all that starch and fat, and the burger had the protein. Then I did the math.)
Desserts (Believe it or not, this is an easy one for me. I'm not a big sweet eater.)
Fried Foods (This is my tough one. Fried chicken, potato chips--hoo, boy, that's where I run into problems. I still have some, on occasion, when I've figured my day's eating to compensate for the calories)
Seconds (Don't get me wrong. I still eat frequently throughout the day. I just limit myself each time.)
Skipping Meals (Since I know I'm eating fewer calories, I know my body needs the ones I'm allotting it. I'm miserable if I don't have nourishment.)
White Bread (The wholer the wheat, the better.)
Well, basically I've given up everything I don't need, both financially and physically.
Financially, these are some things that went:
The Gym (I lift weights at my folk's house and do cardio on the sidewalk and at home)
Cable (I get just local channels now, which is $5 a month from Dish Network)
DSL (Not that I ever had this, but I have $5.95 a month dialup with access4less.net.)
Memberships (I've been a member of a few organizations that required dues. Not anymore.)
Magazine Subscriptions (Got a couple to support a brother-in-law's fundraising effort. Won't be renewing them.)
Eating Out (Maybe a 99c cent chili or something, here and there, or if I have coupons.)
Buying Books (I have full shelves that can show you where I tend to blow those dollars that are burning a hole in my pocket. Thank heaven for libraries.)
Diet-wise, these things are no longer a part of my diet:
Liquid Calories (No milk, no sodas, no punch, no nothing. Not even diet. I used to drink a Sobe a day until one day I noticed the ingredients and nutritional info were the same as for Mountain Dew, and they cost twice as much. Just water for me, thanks.)
Eating Out (I used to think I was doing my body a favor when I'd order two double-doubles instead of getting fries and a soda, since fries had all that starch and fat, and the burger had the protein. Then I did the math.)
Desserts (Believe it or not, this is an easy one for me. I'm not a big sweet eater.)
Fried Foods (This is my tough one. Fried chicken, potato chips--hoo, boy, that's where I run into problems. I still have some, on occasion, when I've figured my day's eating to compensate for the calories)
Seconds (Don't get me wrong. I still eat frequently throughout the day. I just limit myself each time.)
Skipping Meals (Since I know I'm eating fewer calories, I know my body needs the ones I'm allotting it. I'm miserable if I don't have nourishment.)
White Bread (The wholer the wheat, the better.)
Tuesday, February 08, 2005
Cardio, Ho!: Home Brewin'
Don't have a heart monitor, and looking for a way to tell when you're working hard enough on your cardio, without working too hard?
The new issue of Muscle & Fitness describes the "Talk Test," which was recently validated by researchers at the University of Wisconsin at La Crosse.
As you're doing cardio, recite something simple to yourself on occasion, like the Pledge of Allegiance or nursery rhymes.
For aerobic training, you want to get the point where you're having a little bit of trouble talking, but you can still do it.
For interval, anaerobic training, you want to have intervals of maybe 30 seconds where you pass a bit beyond that point, so you can't really speak. Come down for a minute or two and then go harder for another 30 seconds.
Not only does this give you a good basis for measuring yourself, but it also dispels a myth a lot of people believe about cardio. When people think about cardio, they imagine running like fugitives for fifteen miles in the hot sun, and even the thought of that is too exhausting to deal with.
The fact is, you only have to work as hard it takes you to get your heart rate to a certain point. Fortunately (or unfortunately, depending on how you look at it), if you haven't exercised much in a while, you may not have to work very hard to get to that point.
After a while, it will get easier and you'll have to do more work to reach the same heart rate, but you'll still basically be exerting the same amount of effort--and, when you hit that point, you'll be burning more calories in a shorter amount of time.
But hopefully the idea of walking or jogging at a speed that you're just able to carry on a conversation seems a little less daunting than trying to do a Carl Lewis impression.
The new issue of Muscle & Fitness describes the "Talk Test," which was recently validated by researchers at the University of Wisconsin at La Crosse.
As you're doing cardio, recite something simple to yourself on occasion, like the Pledge of Allegiance or nursery rhymes.
For aerobic training, you want to get the point where you're having a little bit of trouble talking, but you can still do it.
For interval, anaerobic training, you want to have intervals of maybe 30 seconds where you pass a bit beyond that point, so you can't really speak. Come down for a minute or two and then go harder for another 30 seconds.
Not only does this give you a good basis for measuring yourself, but it also dispels a myth a lot of people believe about cardio. When people think about cardio, they imagine running like fugitives for fifteen miles in the hot sun, and even the thought of that is too exhausting to deal with.
The fact is, you only have to work as hard it takes you to get your heart rate to a certain point. Fortunately (or unfortunately, depending on how you look at it), if you haven't exercised much in a while, you may not have to work very hard to get to that point.
After a while, it will get easier and you'll have to do more work to reach the same heart rate, but you'll still basically be exerting the same amount of effort--and, when you hit that point, you'll be burning more calories in a shorter amount of time.
But hopefully the idea of walking or jogging at a speed that you're just able to carry on a conversation seems a little less daunting than trying to do a Carl Lewis impression.
Monday, February 07, 2005
Tale Of The Scale
In honor of my finally getting below 250, I thought I'd post a little link to a page where they're selling a scale like the one I'm using to track my losing.
I know I'm getting my honest weight, because it says so right on the face.
I know I'm getting my honest weight, because it says so right on the face.
Sunday, February 06, 2005
Comic
If you get the newspaper, check out the comic in today's Opus.
I can't find it online anywhere, so it's sort of pointless to post this, but have a look, if you've got it.
And if you know where it's at online, please post it in the comments.
I can't find it online anywhere, so it's sort of pointless to post this, but have a look, if you've got it.
And if you know where it's at online, please post it in the comments.
Sunday Book Review: The Art of Playing "Real Life" Monopoly
Feel like you know absolutely nothing about money?
Stop and think about that for a minute. Money's one of those things you have to deal with all the time, whether you know anything about it or not. If you don't know anything about it, you'll probably fear it. People will use your ignorance against you.
Sooner or later, you should learn something about it. If you can afford to shell out hundreds of dollars a year in interest to credit card companies, do you really think you can't afford to buy a book that can make all this money stuff clear?
The Art Of Playing "Real Life" Monopoly, which is less than 10 bucks from Amazon, does a good job of explaining money and money-type opportunities. Things like stocks, bonds, and real-estate are explained in simple terms. In fact, it's all put into the context of games.
It's always amazed me that people who can understand all the rules to cribbage--or even football--think money's too complicated an issue to figure out.
I will warn you--this book is no frills, no fancy covers. It's printed by some obscure publisher out of Oregon and, as of next year, it will be twenty years old.
But it's still as good a place to get started as any.
Saturday, February 05, 2005
Endorphins
If you think you absolutely have no reason to exercise, I can give you one. Even if you're not overweight, even if you have tons of energy every day, even if your blood pressure is so low your doctor has to dig a hole to chart it, there's still one good reason to exercise.
Endorphins.
Endorphins are a feel-good chemical your body distributes in response to stress or pain. Think of them as like morphine, only instead of your doctor injecting from the outside, your body is producing it from the inside. Any time you have a painful experience, or a stressful one, your body reacts by producing endorphins.
The endorphin reaction is two fold. First, a rush of endorphins are produced to deal with the initial pain. If you are suddenly placed into a stressful situation or experience a sudden pain, your body produces endorphins to try to deal with that situation.
Second, after the experience is over, your body starts to hold itself at a higher endorphin level, because it knows such an event might happen again. In other words, we come away feeling better and having a higher threshold for pain.
Just about anything you're passionate about or enjoy doing can probably be linked to endorphins. If you like roller coasters, it is largely because you enjoy that rush of good feelings you get from having been through that traumatic experience. What we've always called an "adrenaline rush" is actually more of an "endorphin rush."
Sci-Fi author Dave Wolverton has made a good case that the same thing happens when we watch a sporting event or read a book or watch a movie. Our body reacts as if we were involved in the situation (which, in a way, we are) and produces endorphins to react to the stress.
Whatever way we first discovered we could get this "rush," is the way we'll probably keep coming back to. People who read books or watch sports or do competitive activities are all looking for the same thing--a certain degree of stress, and the endorphin rush that comes with it. Even people who are addicted to gambling, in the end, aren't really in it for money. If they were, they'd have given up when they didn't get any. They crave that feeling they get when there's the possibility of all that money against the risk of losing it all.
Exercise is a way to do that every day. You put your body through enough stress to start producing those endorphins. It's not meant to wipe you out to the point you can't function--you just exercise to the point where you know your body's worked a bit harder than its accustomed to.
Then, endorphins kick in to deal with the stress. You feel better about yourself and about life. Problems seem easier to face and goals seem more achievable.
And even after the initial "rush" wears off, you're left with a higher baseline for pain and stress than you had before. Something that would have been a big deal before you started seems easier to handle after a few months of consistent training.
It's obviously not the only way to produce endorphins. There are ways like the ones I've suggested above. I also heard from Dr. Benjamin Martinez, a behavioral expert, that smiling produces endorphins, and that studies have shown that it works just as well even if the smile isn't sincere. In other words, smiling alone can sometimes help you feel better.
So go ahead. Become an endorphin pusher.
Endorphins.
Endorphins are a feel-good chemical your body distributes in response to stress or pain. Think of them as like morphine, only instead of your doctor injecting from the outside, your body is producing it from the inside. Any time you have a painful experience, or a stressful one, your body reacts by producing endorphins.
The endorphin reaction is two fold. First, a rush of endorphins are produced to deal with the initial pain. If you are suddenly placed into a stressful situation or experience a sudden pain, your body produces endorphins to try to deal with that situation.
Second, after the experience is over, your body starts to hold itself at a higher endorphin level, because it knows such an event might happen again. In other words, we come away feeling better and having a higher threshold for pain.
Just about anything you're passionate about or enjoy doing can probably be linked to endorphins. If you like roller coasters, it is largely because you enjoy that rush of good feelings you get from having been through that traumatic experience. What we've always called an "adrenaline rush" is actually more of an "endorphin rush."
Sci-Fi author Dave Wolverton has made a good case that the same thing happens when we watch a sporting event or read a book or watch a movie. Our body reacts as if we were involved in the situation (which, in a way, we are) and produces endorphins to react to the stress.
Whatever way we first discovered we could get this "rush," is the way we'll probably keep coming back to. People who read books or watch sports or do competitive activities are all looking for the same thing--a certain degree of stress, and the endorphin rush that comes with it. Even people who are addicted to gambling, in the end, aren't really in it for money. If they were, they'd have given up when they didn't get any. They crave that feeling they get when there's the possibility of all that money against the risk of losing it all.
Exercise is a way to do that every day. You put your body through enough stress to start producing those endorphins. It's not meant to wipe you out to the point you can't function--you just exercise to the point where you know your body's worked a bit harder than its accustomed to.
Then, endorphins kick in to deal with the stress. You feel better about yourself and about life. Problems seem easier to face and goals seem more achievable.
And even after the initial "rush" wears off, you're left with a higher baseline for pain and stress than you had before. Something that would have been a big deal before you started seems easier to handle after a few months of consistent training.
It's obviously not the only way to produce endorphins. There are ways like the ones I've suggested above. I also heard from Dr. Benjamin Martinez, a behavioral expert, that smiling produces endorphins, and that studies have shown that it works just as well even if the smile isn't sincere. In other words, smiling alone can sometimes help you feel better.
So go ahead. Become an endorphin pusher.
Friday, February 04, 2005
Fixed At Last
Well, tonight, just one day shy of a week since the night it was smashed, my window is now fixed again, and my car sits waiting for something to be damaged again.
I just I'd post that so whoever keeps doing it would know that it's your turn again.
I'm sorry it took me so long. You know how tough it is to find time for these things.
I just I'd post that so whoever keeps doing it would know that it's your turn again.
I'm sorry it took me so long. You know how tough it is to find time for these things.
Thursday, February 03, 2005
Boys And Girls Are Different
Ladies, have you ever dieted with your husband, only to become discouraged as the pounds seem to fall off him like rainwater, while the scale didn't budge for you?
Or, even worse: Men, have you ever felt like your wife wasn't trying as hard as you, because you were seeing solid results and she didn't seem to be?
Well, I have news for the both of you. Boys and girls are different.
In the case of weight loss, this works in the boys' favor.
How much weight you lose is a factor of four things:
1. How much you eat.
2. How much you already weigh.
3. How much muscle you have.
4. How much work you do.
In every one of these categories, guys have the advantage.
1. A guy can eat more than a girl, and still lose weight. Depending on how much taller the guy is and how much he weighs, he can eat a lot more. In the case of me and my wife, I can eat around twice as many calories a day as her (me: 2,500 her: 1,2000) and still lose weight.
2. When you weigh a lot, your body has to burn more calories just to keep your body going--to maintain all those "parts." You might think of it as a self-regulatory system for the body. When it gets bigger, it tries to burn more calories to get itself smaller again. Since guys, on average, weigh more than girls do, this actually works to their advantage for weight loss.
3. Guys have more muscle than girls. Again, just a biological fact. If neither of you has seen the inside of a gym since high school, the guy's body will have retained more muscle than the girl's. Since the body has to burn calories to maintain that muscle, the guy will be burning more calories even if he's just sitting around watching TV. Even if you've both been lifting every day, the guy will still have more muscle than the girl, because his body is made to hold more muscle.
4. Guess what guys? If you ran a mile and your wife ran a mile, since you're bigger, taller, and you weigh more, you had to do more work to move your body that mile than she did. Granted, since you have more muscle, you and she may have worked at exactly the same intensity, but it took more energy, and ergo more calories, for you to do it than for her. In other words, you can lose more weight giving exactly the same effort as her.
So ladies, don't get discouraged, and guys, don't get a big head. It's not you. It's not fair. It's biology.
So ladies, go out there and show biology who's boss.
Or, even worse: Men, have you ever felt like your wife wasn't trying as hard as you, because you were seeing solid results and she didn't seem to be?
Well, I have news for the both of you. Boys and girls are different.
In the case of weight loss, this works in the boys' favor.
How much weight you lose is a factor of four things:
1. How much you eat.
2. How much you already weigh.
3. How much muscle you have.
4. How much work you do.
In every one of these categories, guys have the advantage.
1. A guy can eat more than a girl, and still lose weight. Depending on how much taller the guy is and how much he weighs, he can eat a lot more. In the case of me and my wife, I can eat around twice as many calories a day as her (me: 2,500 her: 1,2000) and still lose weight.
2. When you weigh a lot, your body has to burn more calories just to keep your body going--to maintain all those "parts." You might think of it as a self-regulatory system for the body. When it gets bigger, it tries to burn more calories to get itself smaller again. Since guys, on average, weigh more than girls do, this actually works to their advantage for weight loss.
3. Guys have more muscle than girls. Again, just a biological fact. If neither of you has seen the inside of a gym since high school, the guy's body will have retained more muscle than the girl's. Since the body has to burn calories to maintain that muscle, the guy will be burning more calories even if he's just sitting around watching TV. Even if you've both been lifting every day, the guy will still have more muscle than the girl, because his body is made to hold more muscle.
4. Guess what guys? If you ran a mile and your wife ran a mile, since you're bigger, taller, and you weigh more, you had to do more work to move your body that mile than she did. Granted, since you have more muscle, you and she may have worked at exactly the same intensity, but it took more energy, and ergo more calories, for you to do it than for her. In other words, you can lose more weight giving exactly the same effort as her.
So ladies, don't get discouraged, and guys, don't get a big head. It's not you. It's not fair. It's biology.
So ladies, go out there and show biology who's boss.
Wednesday, February 02, 2005
Why You Don't Want A Tax Return
So, now that January's over you have a W-2 and you're busy trying to figure out the best way to get that money away from the government and into your own hands.
You start hearing things like, "Oh, my sister's brother-in-law has an uncle who's going to do it for me," or "My daughter's friend is studying to be a CPA, so I think I'll ask her."
I'm sure everybody who majored in anything close to math dreads this time of year, because they get W-2's shoved at them from every angle from people with puppy-dog eyes and pleas like, "I really need to get $2,000, so I can use it as a down payment on a car."
You want to get money back from the government every year, right? As big a check as you can, right?
Sorry, friends, but no you don't.
You really don't.
You don't want Uncle Sam to give you back one thin dime.
Shift your mental gears for a moment. Imagine a friend of yours comes up to you and hands you two thousand dollars, cash. "Here you go," he or she says. "Take it with my blessing."
"Wow," you say, because although your friend can be helpful, you didn't think they had this kind of money. In fact, they're usually broke, so them having extra to give you makes no sense. You say the only thing you can think of: "Thank you!"
"Don't mention it," they say. "It's actually your money. I've just been taking it here and there where I could, and I thought you could use it back, now."
Would you be grateful to that friend any more? Would the two thousand dollars seem like a very generous gift?
Or would you want to blurt out something like, "You idiot! I could have been using that money all this time to pay down this high interest debt that I have! How long have you had this?"
"Oh, about a year."
"A year? I have debt that costs me 25% interest! You taking this two thousand dollars cost me five hundred bucks!"
Or, if you don't have debt, "I could have put this in my mutual fund and earned two hundred and sixty bucks!"
Or, if you think saving and paying off debt are a waste of time, "I could have blown this on DVDs and pizza!"
The point is, someone else using your money for a year isn't a great proposition. Yet we keep doing it, year after year, when we have too much withheld from our taxes.
Why do we do this? I think there are a few reasons.
1. We actually think we're saving money.
If we're putting money somewhere that we can't get to it for a while, that's a form of saving, right? So if I have extra taxes withheld, I'm giving money to the Government I won't get back until the end of the year. It's like a forced savings plan, isn't it?
No. To borrow an analogy from Robert Allen, a dollar is like a seed. If you plant it in the right place, it will grow. Saving and investing consist of putting the dollars in one of those places. If you want to save your money for a year, your banker will be more than happy to take it away from you for any period of time you would like--they call it a Certificate of Deposit, or "CD" for short. Unlike Uncle Sam, they'll give you some interest on your money.
2. We don't want to run the risk of having to pay.
I'm one of these. While I don't love the prospect of letting Uncle Sam have an interest free loan for a year, it does sound more appealing than having to pay him when the year is up. I have enough debt already. Do I really want to add the Federal Government to the list?
Really, paying back money to Washington isn't as bad as you think. It's almost like the above scenario, turned upside down. You get to be the friend who comes back at the end of the year and says, "Oops. I think this is yours." You get to be the friend who gets the free loan.
In fact, why not use that paranoia you have that the Men In Black will come and haul you away as a motivation to start really saving something? If you think your deductions came down by too much, take that amount and put it in a savings account every month, or a money market account, or somewhere that it will earn you something. Every time you're tempted to grab it, just picture Tommy Lee Jones getting out of a black Mercury in front of your house with a ray gun.
At the end of the year, if the government does want money, you're covered and you still have the interest to play with. And if they don't want it, you're golden--that money is yours now, free and clear.
I'm not suggesting you increase your withholdings above what really belongs to the government. The ideal scenario is that you pay them a couple of hundred dollars, or you pay them a couple of hundred dollars. But if you're getting back checks with four or five digits to the left of the decimal point, and you're excited about it--
Well, I've got a deal for you. Why don't you just sign that check over to me? I promise to give you back the same amount in a year, and you can get just as excited about it all over again.
Or doesn't that sound like a good deal to you, when you really think about it?
You start hearing things like, "Oh, my sister's brother-in-law has an uncle who's going to do it for me," or "My daughter's friend is studying to be a CPA, so I think I'll ask her."
I'm sure everybody who majored in anything close to math dreads this time of year, because they get W-2's shoved at them from every angle from people with puppy-dog eyes and pleas like, "I really need to get $2,000, so I can use it as a down payment on a car."
You want to get money back from the government every year, right? As big a check as you can, right?
Sorry, friends, but no you don't.
You really don't.
You don't want Uncle Sam to give you back one thin dime.
Shift your mental gears for a moment. Imagine a friend of yours comes up to you and hands you two thousand dollars, cash. "Here you go," he or she says. "Take it with my blessing."
"Wow," you say, because although your friend can be helpful, you didn't think they had this kind of money. In fact, they're usually broke, so them having extra to give you makes no sense. You say the only thing you can think of: "Thank you!"
"Don't mention it," they say. "It's actually your money. I've just been taking it here and there where I could, and I thought you could use it back, now."
Would you be grateful to that friend any more? Would the two thousand dollars seem like a very generous gift?
Or would you want to blurt out something like, "You idiot! I could have been using that money all this time to pay down this high interest debt that I have! How long have you had this?"
"Oh, about a year."
"A year? I have debt that costs me 25% interest! You taking this two thousand dollars cost me five hundred bucks!"
Or, if you don't have debt, "I could have put this in my mutual fund and earned two hundred and sixty bucks!"
Or, if you think saving and paying off debt are a waste of time, "I could have blown this on DVDs and pizza!"
The point is, someone else using your money for a year isn't a great proposition. Yet we keep doing it, year after year, when we have too much withheld from our taxes.
Why do we do this? I think there are a few reasons.
1. We actually think we're saving money.
If we're putting money somewhere that we can't get to it for a while, that's a form of saving, right? So if I have extra taxes withheld, I'm giving money to the Government I won't get back until the end of the year. It's like a forced savings plan, isn't it?
No. To borrow an analogy from Robert Allen, a dollar is like a seed. If you plant it in the right place, it will grow. Saving and investing consist of putting the dollars in one of those places. If you want to save your money for a year, your banker will be more than happy to take it away from you for any period of time you would like--they call it a Certificate of Deposit, or "CD" for short. Unlike Uncle Sam, they'll give you some interest on your money.
2. We don't want to run the risk of having to pay.
I'm one of these. While I don't love the prospect of letting Uncle Sam have an interest free loan for a year, it does sound more appealing than having to pay him when the year is up. I have enough debt already. Do I really want to add the Federal Government to the list?
Really, paying back money to Washington isn't as bad as you think. It's almost like the above scenario, turned upside down. You get to be the friend who comes back at the end of the year and says, "Oops. I think this is yours." You get to be the friend who gets the free loan.
In fact, why not use that paranoia you have that the Men In Black will come and haul you away as a motivation to start really saving something? If you think your deductions came down by too much, take that amount and put it in a savings account every month, or a money market account, or somewhere that it will earn you something. Every time you're tempted to grab it, just picture Tommy Lee Jones getting out of a black Mercury in front of your house with a ray gun.
At the end of the year, if the government does want money, you're covered and you still have the interest to play with. And if they don't want it, you're golden--that money is yours now, free and clear.
I'm not suggesting you increase your withholdings above what really belongs to the government. The ideal scenario is that you pay them a couple of hundred dollars, or you pay them a couple of hundred dollars. But if you're getting back checks with four or five digits to the left of the decimal point, and you're excited about it--
Well, I've got a deal for you. Why don't you just sign that check over to me? I promise to give you back the same amount in a year, and you can get just as excited about it all over again.
Or doesn't that sound like a good deal to you, when you really think about it?
Tuesday, February 01, 2005
31 days down, 334 to go -- One Month
Well, I'm 1/12th of the way through this thing. I'm more than on track to lose all my weight, and way behind on my efforts to get out of debt. Not that I expected to be any farther on the debt by now, but it hasn't come down by 1/12th, so I'm technically behind. Although the good news is my tax return should even things up.
It is going to be enough to nearly pay off this fine laptop I'm computing on. Since that's the highest interest debt I have, that will be a very good thing.
Something like 30 bucks of the 40 bucks a month minimum payment was going to interest--meaning the "loan" was only going down by 10 bucks a month, despite the fact that the machine itself probably depreciated 1,000 the second it left the factory and came to me.
I read this week that more and more businesses are starting to operate this way. Sears credit is the highest money-making part of the Sears company. No longer does Sears sell tools, now they finance "stuff." Ford's the same way--they keep on making cars so their finance department will have something to finance.
They're all getting rich off the fact that you and I are willing to pay many, many times more for an item than the tag says, as long as they stretch those payments out to make it as painless as possible.
Once that's paid off, I will never finance a household product again.
It is going to be enough to nearly pay off this fine laptop I'm computing on. Since that's the highest interest debt I have, that will be a very good thing.
Something like 30 bucks of the 40 bucks a month minimum payment was going to interest--meaning the "loan" was only going down by 10 bucks a month, despite the fact that the machine itself probably depreciated 1,000 the second it left the factory and came to me.
I read this week that more and more businesses are starting to operate this way. Sears credit is the highest money-making part of the Sears company. No longer does Sears sell tools, now they finance "stuff." Ford's the same way--they keep on making cars so their finance department will have something to finance.
They're all getting rich off the fact that you and I are willing to pay many, many times more for an item than the tag says, as long as they stretch those payments out to make it as painless as possible.
Once that's paid off, I will never finance a household product again.
Monday, January 31, 2005
Unexpected Expenses
Well, 1/3 of the $300 is now officially spoken for.
I walked out to my car yesterday morning to find my car window had been smashed in.
Again.
This time it was the driver's side. "Daddy's window," as my girls call it. It was still near enough to last time that I hadn't gotten out of the habit of emptying the car when I got out, so they got nothing.
Okay, maybe they got something--I didn't actually count the hot sauce packets in the glove box--but they didn't get anything of note.
A year ago, I don't know what I would have done in this scenario. With rent taking nearly every dollar of tommorrow's paycheck, I'd probably have tacked another chunk of change on one of the credit cards, which I may have just paid down to under the limit. Once the interest hit, I'd have been over my limit, and they'd have hit me with over limit fees. Then I'd pay it down in February until that monthly expense came up.
As it is, I'm glad I had the money there.
But I'll tell you--this is going to be a long year if every time I get a little ahead somebody breaks something.
I walked out to my car yesterday morning to find my car window had been smashed in.
Again.
This time it was the driver's side. "Daddy's window," as my girls call it. It was still near enough to last time that I hadn't gotten out of the habit of emptying the car when I got out, so they got nothing.
Okay, maybe they got something--I didn't actually count the hot sauce packets in the glove box--but they didn't get anything of note.
A year ago, I don't know what I would have done in this scenario. With rent taking nearly every dollar of tommorrow's paycheck, I'd probably have tacked another chunk of change on one of the credit cards, which I may have just paid down to under the limit. Once the interest hit, I'd have been over my limit, and they'd have hit me with over limit fees. Then I'd pay it down in February until that monthly expense came up.
As it is, I'm glad I had the money there.
But I'll tell you--this is going to be a long year if every time I get a little ahead somebody breaks something.
Sunday, January 30, 2005
Sunday Book Review: Rich Dad, Poor Dad
There are two ways to build wealth. The way I've been talking about, the Dave Ramsey way, the Millionaire Next Door way, is to get rich on equity. In other words, with money you actually have.
The other way is to use leverage. In other words, become wealthy by going into debt. I'm sure that doesn't make sense to anybody--when's the last time you knew somebody who had made tons of money off Visa?
The trick is learning the difference between good debt and bad debt. Leverage is, in theory, "good debt." The best way to define good debt is "debt that pays for itself."
In this book, Kiyosaki does a good job of changing the way we define the terms "asset" and "liability." Traditionally, an accountant would say an "asset" was something you owned that had value. A "liability" was something to which we owed money.
Kiyosaki's very valid argument is that, by this definition, we categorize a lot of things as "assets" that don't help us financially. Is that boat in the driveway really an asset? Or is it costing you loan payments, gas, and repairs?
This book calls for a new definition of these terms. An asset is something that puts money in your pocket. A liability is something that takes money away from you. If you were to lose your job today, would this item bring you money, or drain money? That's how to tell if it's an asset or liability.
Instead of "Net Worth," Kiyosaki talks about "Cash Flow." His definition of wealth is whether you have enough money flowing in each month from assets to pay all your expenses, even if you quit working today. If you do, you're wealthy. Regardless of whether that's $1,000 a month or $100,000 a month, if it covers your expenses you're wealthy and free to do whatever you want--work or otherwise.
So good debt would be invested in an asset that pays for itself and puts money in your pocket. If you buy a coin-op car wash and the payments on the loan are $1,200 a month but the car wash makes you $1,500, you now have $300 in positive "cash flow." You've harnessed the power of that much-mentioned "OPM"--Other People's Money.
Can this work? You bet. There are dozens of people who can prove it. A lot of your "flashy" millionaires are this way. Trump's leveraged up to his hairpiece. I'm sure that's why he files bankruptcy week after week after week.
And while we all sit back, feeling smug to watch him making and losing fortunes over and over, you notice he still gets to have the big house, the big plane, and the fancy weddings no matter how many times he does it. There are advantages to leveraging.
But books like this always contain caveats. "Don't buy the first house you find!" "You'll have to put a lot of effort into finding the deals." "I shop for deals on homes the way your Mom used to shop for deals on groceries."
In other words, they have to put as much time, effort, and energy into this as you're already putting into your full-time job.
Operating leveraged isn't easy. It's very, very risky. If you find yourself in a money-losing investment, you're going to have to come up with that difference yourself, and even if you manage to bail out on it, it will often be at a loss since it proved to be worth less than you thought.
And there are plenty of not-so-flashy equity millionaires. Bill Gates is an equity billionaire. Microsoft, for all the problems people have with them, runs debt free.
I absolutely believe in the "Cash Flow" principles taught in this book. We need to learn to buy things that make us money instead of buying things that cost us more money. Your money can undoubtedly work harder than you can.
However, I still maintain the risk involved in leveraging is only worthwhile when you can afford to take it.
Saturday, January 29, 2005
Speak Your Mind
As an experiment, I've gone ahead and enabled the comments on this site, at a couple of people's request.
Time will tell whether this proves to be a good thing, or one of those experiments that goes horribly wrong and wipes out half of humanity.
Time will tell whether this proves to be a good thing, or one of those experiments that goes horribly wrong and wipes out half of humanity.
Fame!
Thanks to reneegetsfit.com for the link. Keep it up, Renee!
And thanks for the info on peaches. I never knew you could get 10% of your daily calcium from a peach.
And thanks for the info on peaches. I never knew you could get 10% of your daily calcium from a peach.
Friday, January 28, 2005
Discipline--It Ain't Easy
Alright, so I just got a mileage check in the mail, for over $300. I had to do a lot of driving in December, and now the company's paying me back for it.
So now we've got $300 burning a hole in our pockets. Part of what got us here was the overwhelming desire to spend every penny we got, and some we didn't. So now, we're locked into a tight budget, where every penny we've got (and some we don't) are all spoken for, and it's like somebody who just got tied up discovering he has some wiggle room.
Your brain focuses with laser-like intensity, on that one spot you can move.
So now we've got $300. We know there's a bunch of things we could use. My wife needs a new sewing machine. The refrigerator's about ready to go. The rice cooker went out, the crock pot's cracked, etc, etc, etc.
We also know the car needs some work done on it. We did a quick fix job on it (I cleaned the spark plugs) but didn't really address the real problem (something is leaking that needed to be cleaned off the spark plugs). Technically, the money is meant to fuel and maintain that car.
Actually, to be even more technical, the best thing you could do with a mileage check is save it to pay cash for your next car. Helping pay this car off would be the next best thing to that.
Of course, I could also put it away, and use it as an emergency fund for whichever of these becomes a crisis first.
In other words, there's a whole bunch of logical, sensible stuff this could go to, that would either curtail a future problem, or shore me up for when it happens.
So why is it my first reaction is still, "Hey, I got some money. Let's order some pizza!"?
So now we've got $300 burning a hole in our pockets. Part of what got us here was the overwhelming desire to spend every penny we got, and some we didn't. So now, we're locked into a tight budget, where every penny we've got (and some we don't) are all spoken for, and it's like somebody who just got tied up discovering he has some wiggle room.
Your brain focuses with laser-like intensity, on that one spot you can move.
So now we've got $300. We know there's a bunch of things we could use. My wife needs a new sewing machine. The refrigerator's about ready to go. The rice cooker went out, the crock pot's cracked, etc, etc, etc.
We also know the car needs some work done on it. We did a quick fix job on it (I cleaned the spark plugs) but didn't really address the real problem (something is leaking that needed to be cleaned off the spark plugs). Technically, the money is meant to fuel and maintain that car.
Actually, to be even more technical, the best thing you could do with a mileage check is save it to pay cash for your next car. Helping pay this car off would be the next best thing to that.
Of course, I could also put it away, and use it as an emergency fund for whichever of these becomes a crisis first.
In other words, there's a whole bunch of logical, sensible stuff this could go to, that would either curtail a future problem, or shore me up for when it happens.
So why is it my first reaction is still, "Hey, I got some money. Let's order some pizza!"?
Thursday, January 27, 2005
Insulin
Some of the hard-core Atkins folks out there are saying, "What about the insulin response?"
See, when you OD on carbs, your body produces Insulin, a fat-storage trigger. This is because the carbs get converted into sugar which goes into your bloodstream, and your body wants to get your blood sugar down. Hence the insulin tells it to cart off some of that sugar and store it, to get it out of the way.
Atkins says that by avoiding carbs, you're avoiding the insulin response. No insulin = no fat storage, right?
Sort of. What Atkins doesn't tell you is two fold.
1. You need carbs. You just do. You need them for energy, you need them to feel good, your brain needs them to think. So the logic of this is like the logic of telling someone that since that crud in their car engine that's slowing down performance is oil buildup, they shouldn't put oil in their car.
2. There are other ways to limit the insulin response. If you mix the carbs, either with fiber or with protein or with both (as is preferable) you reduce the insulin response without eliminating the carbs altogether. Since the rate at which the carbs get absorbed is slowed down, your blood sugar doesn't spike as much, and you're okay.
See, when you OD on carbs, your body produces Insulin, a fat-storage trigger. This is because the carbs get converted into sugar which goes into your bloodstream, and your body wants to get your blood sugar down. Hence the insulin tells it to cart off some of that sugar and store it, to get it out of the way.
Atkins says that by avoiding carbs, you're avoiding the insulin response. No insulin = no fat storage, right?
Sort of. What Atkins doesn't tell you is two fold.
1. You need carbs. You just do. You need them for energy, you need them to feel good, your brain needs them to think. So the logic of this is like the logic of telling someone that since that crud in their car engine that's slowing down performance is oil buildup, they shouldn't put oil in their car.
2. There are other ways to limit the insulin response. If you mix the carbs, either with fiber or with protein or with both (as is preferable) you reduce the insulin response without eliminating the carbs altogether. Since the rate at which the carbs get absorbed is slowed down, your blood sugar doesn't spike as much, and you're okay.
Bad Coupons
Of course, right now is a bad time for coupon clippers who are trying to cut down the whole grocery bill.
Unless you want to live on a diet of Nacho Cheese, onion dip and party favors.
Unless you want to live on a diet of Nacho Cheese, onion dip and party favors.
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