This is Part 2 in a series about The Number by Lee Eisenberg. Part 1 is here.

Lee Eisenberg is not a fan of rules of thumb. In his new book, The Number, he takes a look at a few of these rules and effectively thumbs his nose at them. The author says:

[M]any financial writers are content to continue to crank out simple but useless rules of thumb. Feel free to ignore them. A solid, reliable Number will not fall out of the pages of a magazine or newspaper. If you’re looking for certainty in a Number, a large factor of you must be added into the equation.

Lee takes a look at a popular calculation whose proponents claim that in order to determine your necessary annual income in retirement for an “acceptable existence,” multiply your latest annual salary by a factor of 0.7. Lee points out that this simplifcation neglects several important factors that can greatly affect the Number, thus greatly affecting the strategy necessary to attain that number.

Here are the missing, difficult-to-quantify variables: Read the rest of this article »

Kiyosaki’s rich dad told him not to diversify—rather, seek out “the best” investments. The author attempts to use anecdotal evidence (“I knew a guy who… therefore everyone…”) to villify the financial planning industry.

Suddenly, people without much financial education became “professional financial advisors.” School teachers, used car salesmen, housewives, and insurance agents found new careers as financial advisors selling investments to people just like themselves… When one retired pilot was asked what he was going to do now that his pension had been cut from $11,000 a month to $2,300 a month, the 62-year-old pilot said, “I’m going to become a financial planner.”

The 62-year old pilot could have become a participant in any number of professions. I hope that when Kiyosaki is 62, he doesn’t plan on learning any new skills as it would go against his view of human cognitive ability. Moreover, the sentiment that teachers and housewives, etc. are less intelligent breeds is quite offensive. Anyone can learn to become a financial planner. Cedrtainly it takes time and effort to become moderately adept, but it’s not rocket science.

Kiyosaki’s not in the real estate investing business, he’s in the authorship and seminar business.

Regardless of his attitude, I could agree to a degree with some of his statements about diversification. Kiyosaki’s reasons for justifying diversification: First, it’s a good plan for passive investors—those who don’t want to or can’t put in the effort to researching good investments. Second, if one cannot focus on research, diversification helps manage risk.

Here are some articles worth the look.

• Jeff Brown from the Philadelphia Inquirer calls for an end to quarterly guidance.
• Four ways to simplify your life and save from MSN Money.
• Just when you thought real estate in New York City was getting a little pricey, now you have to worry about staking a claim to air.
• Also from CNN, more people are considering mystery shopping for making some extra money. I signed up for one of these, but the amount of effort isn’t worth the payout in my opinion.

I originally posted this in September, 2003, but it never hurts to revisit the issue to raise the feeling self-worth a little bit. If you’re feeling down about not being able to afford to live on your income, just pop on over to the Global Rich List, enter your income, and voila!—instant satisfaction with your job.

If you want to feel even better, keep in mind the affluent are worse off when it comes to inflation. The luxury items to which the rich grow accustomed are much more affected by inflation then the necessities of life for the lower classes. The CLEW (“Cost of Living Extremely Well”) index measures inflation of the prices of certain items favored by rich folk. From 2004 to 2005, the index rose 4% while the Consumer Price Index rose only 3.6%.

This is a good thing, according to the article:

As long as luxury goods are inflating faster than the regular stuff, the economy is cooking. There is a good chance that just about everyone is doing OK. When luxury goods go on sale, everyone is in trouble.

If you’re still not encouraged about your own situation, take a look at the income graph. (It’s a shame that every individual in the world does not have the same expenses; if they had, this graph might actually mean something.) Read the rest of this article »

If you have ten million dollars lying around and your daughter happens to be preparing for her Bat Mitzvah, why not drop the cash on a fancy party for her and her friends? While you’re at it, go ahead, invite some popular entertainters, such as Aerosmith, Tom Petty, and 50 Cent.

Well, this is pricely what David H. Brooks, the CEO of DHB Industries did for his daughter, Elizabeth. Mr. Brooks’ company makes bullet-proof vests, by the way.

From the article:

The party cost an estimated $10 million, including the price of corporate jets to ferry the performers to and from. Also on the bill were The Eagles’ Don Henley and Joe Walsh performing with Fleetwood Mac’s Stevie Nicks; DJ AM (Nicole Richie’s fiance); rap diva Ciara and, sadly perhaps (except that he received an estimated $250,000 for the job), Kenny G blowing on his soprano sax as more than 300 guests strolled and chatted into their pre-dinner cocktails.

It’s a shame about the Kenny G. Also:

Fitty and his posse smelled like an open bottle of Hennessy.

What a classy party. $10 million buys a good fiesta at the Rainbow Room, apparently. What kind of gift bags did Liz’s 150 close and personal friends get to take home with them?

... [T]he 150 kids in attendance seemed more impressed by their $1,000 gift bags, complete with digital cameras and the latest video iPod.

Home sales hit new record. Sales of new homes in the U.S. rose by 3.4 percent in October.

Housing boom past its peak? The pace of new home building slowed sharply in October, the weakest month in 2005.

Home builder sentiment falls. The National Association of Home Builders says November was a bad month.

Consumer confidence surged in November with falling gasonline prices.

Let’s keep everyone guessing. Why bother reading or watching the news? The stories will change the following day.

At the moment I’m writing this entry, 85% of respondents to an informal CNN Money survey say they’d be willing to take a pay cut if the situation was right, while the other 15% would not consider such a move.

According to Jeanne Sahadi, who speaks from personal experience, there are situations where taking a pay cut pays off in the long run, financially or otherwise.

It might make sense to take a job offering less money than you’re making now in one of the following situations:

• The new job is in an area where the cost of living is lower and your money will “go farther.”
• The new job offers non-cash benefits of value, such as health insurance, matches on a 401(k), etc.
• The new job offers growth and training opportunities.
• The new job could save you from being stuck in a mid-career rut.
• The new job might fulfill some of your long-held desies.

• The new job provides you with less stress.

  I would consider taking a pay cut at some point in my life if I believed there were other benefits to taking the position being offered. I’m hoping that I won’t take a salary reduction any time soon, however.

  Are there any other situations in which a person might be willing to take a pay cut?

The FCC now believes that consumers can save money by picking and choosing which cable channels they’d like to receive, with each channel priced separately. Would this new pricing plan change your viewing habits?

I’m paying $14 per month for the most basic cable television service at the moment. I’d like to add a few channels, such as Comedy Central (I miss watching The Daily Show), and I would do so if the price is right. I’d pay another $5 per month for that channel, but I have a feeling that any plan developed by Comcast will not be as simple as that.

I’m sure the cable companies would love to get into a “one-year agreement” level of service, where a termination fee is inflicted on anyone who cancels service, and the introduction of a new pricing structure is a good time to introduce new fees, from the company’s point of view.

If you prefer satellite to cable, you can do what this man has done: erect 12 satellite dishes to receive 5,000 radio and television stations, including free programming as well as Direct TV and Dish Network subscriptions.