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August 2006

Final Question of the Day

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The final Question of the Day is being hosted at Get Rich Slowly, so take a minute to answer this question over there: What does money mean to you? The full schedule is contained below. [click to continue…]

SafeDavid Bach, author of The Automatic Millionaire, offers suggestions for making your emergency savings automatic.

Before we get to the tips, most people agree that building an emergency stash of cash that can last long enough to cover three to six months should be one of the first financial priorities, even for those in debt. This can be difficult to achieve. Bach says the average American has less than one month’s worth of expenses set aside.

Here are some tips for getting to the three to six months point: [click to continue…]

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Mental MistakeJonathan Clements from the Wall Street Journal decided to don his psychologist hat and evaluate the muddled minds of investors. He discovered four mindsets that hinder people from investing intelligently.

Let’s face it, amassing a decent-size nest egg isn’t exactly rocket science. All we have to do is save regularly, buy a few low-cost mutual funds and patiently await our reward. Yet most of us scorn such humble simplicity. Instead, we are too confident and too clever.

* People buy the investments they wish they bought at some other time. As the price as an investment rises, investors should “grow leery” of the value. Instead, people jump on the bandwagon for last year’s hot stock or commodity. If it works out in the short term, the investor feels like a genius and gains confidence to make more unsafe moves.

* People want to get even. If Jack’s identically-housed neighbor sold her dwelling last year for $1 million, Jack will have a hard time settling for $800,000. “[This is] about avoiding regret. If we sell for less than we paid or less than the neighbors got, we have to admit we made a mistake, with all the associated pangs of regret.”

* People shy away from their falling investments. In some cases, falling prices represent deteriorating “underlying fundamentals.” Clements uses the example of Treasury Inflation-Protected Securities (TIPS), and he believes the lower prices make them a better investment, with no damage to the fundamentals.

* People have no self-control. With the negative savings rate in the United States, we would rather spend now than put away our money and invest for the future. We convince ourselves that everything will be okay in the end. Jonathan Clements believes this may be our biggest mistake.

I can only speak for myself and say I believe I’ll be fine in the end. I’m working hard, saving money, making money in places I never thought I would be if you asked me a few years ago, finishing a master’s degree and contemplating my next steps in career and education, and always learning about investing. If I were to live like I was in 1999, spending more money on the commute alone than I was making, I would not be able to say the same.

Thanks to Jim Mahar for sharing the link.

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Earlier this week, I participated in JLP’s Question of the Day Marathon by asking about readers’ childhood experiences with money. The question received a number of great responses.

The Big Money by Fred KobrickTo spice up the event, I added a giveaway. One lucky random commenter will receive a free copy of The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security, by Frederick Kobrick. Perhaps the giveaway inspired readers to comment, because there were a number of great responses. Here was the official question:

While growing up, what were you taught about personal money management by your immediate family and surroundings (directly or by example, positive or negative), and how do these ideas factor into your life now?

Blaine Moore answered:

I am sure that I was taught a lot by example, since I seem to have a pretty good idea of what I am doing now and had a good base to build off of. I do not specifically remember many lessons though.

This is the case for many people, I think. Parents may not have taught specific lessons, but by modeling good behavior with money, they teach their children how to behave and manage money appropriately. Children can learn from negative examples as well, as Jason did:

Well, most of the teaching I received was by examples of what not to do. Sadly, most of my family was pretty bad when it came to money. The majority lived above their means instead of saving, kept credit card balances, didn’t put away money for retirement etc… I do think that growing up in a middle to lower class background is normally good for teaching people that you can’t have everything and you have to make priorities. But some of that goes out the window when your parents splurge on you every christmas and birthday.

Here’s an excerpt from the winner of The Big Money: [click to continue…]

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Spending Philosophies: Five Tips for a Better Relationship

by Luke Landes

Money Magazine is profiling Michael and Brittany Abbate. Here is their situation. The couple used to have a total annual income of $135,000 to support them as well as their daughter, but thanks to a move from Chicago to Phoenix and a pregnancy, they now make less than half that amount. Due to the pay […]

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Even Renting is Expensive

by Luke Landes

Melinda Fulmer from MSN Real Estate is reporting on the most expensive cities for renters, based on “average rent.” Unsurprisingly, New York is at the top of the chart, followed by San Francisco, Los Angeles, San Jose, the OC, Boston, Oakland, San Diego, Washington, D.C., and Fort Lauderdale. With prices high — the average in […]

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Welcome BusinessWeek and Yahoo Finance Readers!

by Luke Landes

(Note: This post will stay at the top of the index for a while. Scroll down for recent blog entries.) I’d like to welcome any new readers coming from Karyn McCormack’s nice article in BusinessWeek Online, Best Blogs for the Young and Broke (which has been republished on Yahoo Finance). Karyn does an excellent job […]

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Gardening in New Jersey: Invasion of the Bunnies

by Luke Landes

If you plant a vegetable garden and you live in New Jersey, this news may concern you. Conditions are apparently perfect (a mild winter and enough spring rain to encourage a lot of vegetable growth) for an increased number of baby bunnies (link free for next 14 days only) this season. There are an average […]

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Home Theater Equipment: What’s In My Basement

by Luke Landes

This is a guest post written by Darren R. Sussman, founder and chief engineer of Reid Sound, Inc., a company specializing in audio/visual services for all types of events including theater, concerts, meetings, tradeshows, and more. This is the second of two parts. The first part is A Shopping Guide for the Enthusiast. In this […]

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Home Theater Equipment: A Shopping Guide for the Enthusiast

by Luke Landes

This is a guest post written by Darren R. Sussman, founder and chief engineer of Reid Sound, Inc., a company specializing in audio/visual services for all types of events including theater, concerts, meetings, tradeshows, and more. This is the first of two parts. I am involved in audio-visual professionally, but what I do is more […]

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