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This mental trick helped me to stop “stupid spending”.

Good Monday morning everybody! So normally I don’t ask people to like and share posts at the beginning but if this post helps even just one person with spending then I am going be happy.

How much does something cost? Most people look at the cost of an item in dollars and cents. I love hats. I have a weakness for them. Lets say that the average cost of a decent hat is about $25. Pretty straight forward, right? Well I don’t look at a new hat as $25. I don’t look at things like that in the amount of dollars they might cost, but the amount of hours I would need to work to be able to buy it.

Lets just say that after taxes my hourly wage is $10. That hat doesn’t cost $25, instead it costs 2.5 hours. That bar tab doesn’t cost $120, instead it cost 12 hours. That car payment isn’t $300 a month, instead its 30 hours a month.

It really changed how I looked at my spending when I started thinking about the money I spent this way instead.

Its easy for me to say to myself “yeah, $25 is a small price to pay for a new hat, plus I look great in it!”

Its not so easy for me to say “if its at the end of my shift, I am tired, hungry and I miss my wife and sons am I willing to spend another two and a half hours at work to get this hat?”

The answer is usually not only “No!” but “Hell No!” I don’t care how good that hat looks its not work it! I don’t need it and its not worth it to me.

This little mental trick has helped me prioritize my spending more that anything else. I normally work four ten hour shifts Monday-Thursday but when I am tired its easy for me to pick up an extra shift on a Friday. If I view my debt as 250 hours then its easy for me to put an extra couple of hours in at work because if I make the sacrifice now then I wont have to give up that time later.

I also use this trick for justifying spending a little extra time at work to put more into my 401K or IRA. If I work an extra couple hours now when I am thirty years old and I can handle it then that’s a few less hours that I may have to work when I get older and maybe can’t handle such a heavy work load.

I know this is a different way to look at the world and the value of things but honestly it has helped me out a lot. Its one thing that has helped me prioritize how I spend my time and money. Like I said earlier if this post helped out even one person then I am going to be happy.

Once again, thanks for reading, liking, commenting and sharing.

I love the feel of a new phone in my hands, but not as much as the feel of money in my wallet.

So recently I was logging on to all of my accounts to pay my monthly bills and I got the most fantastic message from my cell phone carrier. I’m eligible for an upgrade to my phone! Naturally I clicked on the link which directed me to a page filled with all the latest and greatest cell phones. Apple, Samsung, Google, you name it! This ones got the best camera on a cell phone ever! That ones got a stylus! That one can recognize my face!

Then reality set in. I’m sitting here looking at all these new phones on my phone that works just fine. The pictures I have on my phone right now look fine. I don’t care if my phone can recognize my face. Most importantly though, I’m not paying anything to keep the phone I have right now.

I mean I haven’t even used have the features that the phone I have right now can do. Why on earth would I spend more money to buy a phone that can do more stuff that I will ever need?

This whole thing got me thinking. How many people spend money they don’t have because of flashy and trivial advertising? I mean you already streamed countless hours on that TV that still works just fine. Will a curved TV really improve your life that much? You already had the time of your life taking your kids on family road trips in that truck that still runs like a champ. Will a brand new truck with a 500 dollar a month payment really improve your life?

For me, the answer to these questions is a strong NO! Yeah, I love the feel of a new phone in my hand, but not as much as I love the feel of money in my wallet. I love the look of those new 6.7 Ford diesels but I love my 2002 7.3 F350. My truck works great. Plus, because of the year I’m not spending the extra money on exhaust and emission work and I dont have to buy diesel exhaust fluid. I drive 4 miles to work so any money I would save in gas would quickly be eaten up by that massive truck payment if I got a new truck.

I guess what I’m saying is I want my reader to be financially strong. Just because you can buy something new doesn’t mean you should buy something new.

It took me a long time to develop the mentality of gaining more joy from contributing to my 401K and IRA than buying the latest and greatest. I get joy by the thought that I wont have to work forever. That I wont be solely relying on Social Security (If its even going to be there by the time I retire, but that is a discussion for another time).

Once again, thanks for reading. Please feel free to like, comment and share.

Tariff? Yeah I know her.

Given all the talk in the news recently I thought it would be prudent to have the term of the week be that pesky little word TARIFF!

First of all I want to clarify that I know everyone has their own feelings on tariffs. Are they good? Are they bad? I have my own feeling but I am going to try to keep this post as objective as possible.

What is a tariff? A tariff is a special tax that a country can impose on good imported into their country. These taxes can be on a specific item, a certain group of items or all items. These taxes can also be on goods imported from certain countries or regions.

Why would a tariff be imposed? Usually these are imposed in order to make domestic products more competitive and desirable. If we put a tariff on all t-shirts made in Bangladesh that drove their price up to the same amount or even greater that t-shirt companies based in the US then there would be more incentive for consumers to buy from the US based company.

Now keep in mind that there can be a wide range of how tariffs can be imposed. There could be different tariffs imposed on finished products as opposed to components of a product. Lets say that there is Bolivian based pillow company. They may have a huge tariff imposed on their product when its brought into the US. Now lets say there is a US based pillow company. They might import their goose feathers from Canada and their textiles from Iceland. The US company could assemble pillows from these two items in the US and even though the components are not from the US, the pillow could still have that Made in America sticker. Now the Bolivian pillow company might have a hefty tariff to deal with while the goose feather and textile companies have to deal with much smaller tariffs or even none at all.

Here is the catch. Most countries aren’t going to have tariffs imposed on their good and just roll over and take it. A country might respond to tariffs by imposing their own tariffs in response. A country might stop importing certain goods in response or change the price of the goods they are selling.

Honestly I think tariffs can have their place in the global economy but I don’t think they are some magic pill that will make things all hunky-dory. Often times there will be negative side effects along with the positive and sometimes these effects wont be felt for a while after these tariffs are imposed.

Once again, thanks for reading, liking and subscribing.

Started thinking about my finances like a football game.

Ah, the never ending debate. Does defense win games or is offense the thing that wins games? We have all seen those games when you see one team that has an unstoppable offense pitted against a team with an impenetrable defense. These games usually spark endless debates in living rooms and sports bars across the world.

I don’t know when I first started thinking about my finances this way if you think about it a lot of your finances are similar to this debate. As I have said before a lot of finance can be complicated but one aspect of my finances that I keep in mind is the mantra “reduce debt, increase income”.

When I think of my finances in terms of defense I think of reducing debt and reducing what I call “stupid spending”. When you think about it its pretty simple. The more you are paying someone else, the less you can pay yourself. 20% on an ongoing credit card balance, 5% on an auto loan, 10% on a personal loan, 7% on some student loans. Not only do all these payments add up but more importantly the interest you pay on these pile up. The interest you pay on these are going to pay some one else. Its hard to max out your IRA contributions when all of your money is going to someone else. Now when I think of what I call stupid spending I think of buying things I don’t need. The old story about how if you buy a TV you don’t need that is on sale from $1250 to $1000 you didn’t save $250, you spent $1000 that you didn’t have to. My thoughts on stupid spending is why I deal with the small inconvenience of packing my own lunch when I go to work or why I still haven’t bought that Salty Crew hat I want but don’t need.

When I think of my finance in terms of offense I think of the ways that I can increase my income. The more you are making, the more you have to save and invest. If you save 15% of your income to a 401k you are going to put a lot more in if you are making $75,000 a year than if you are making %60,000 a year. Now I know it can be hard to increase your income, but its not impossible. It never ceases to amaze me that in one breath an individual will complain that their paycheck is too small but in another breath they act repulsed at the idea of working a little overtime. I get it though, I recently went to working swing shifts at my job in order to get an extra dollar an hour in shift differential.

Now, both decreasing your spending and increasing your income are going to require some sacrifices and effort but I think in the long term these sacrifices are completely worth it. I will say that increasing your income and decreasing your spending work much better together than separate. A good example of this is the ESPN documentary “Broke”. We have all heard of the star athlete who makes millions in lucrative contracts but then turns around and buys a gold plated toilet or a tiger and a couple years later declares bankruptcy. What a surprise that spending a small fortune on a watch that tells time the same as a g-shock or that phone that’s already in your pocket could lead to financial ruin.

Just keep in mind that just because you are making $100,000 dollars a year does not mean that you have to live like you are making $100,000 dollars a year.

On a side note before I close this post out I just wanted to thank those of you that have subscribed and liked the page. I know this blog is still really small but its awesome to see one or two people subscribe with every post. Its been amazing to see people from other countries reading these posts as well (love my Canadian and UK readers). I have been thinking that if I get a big enough following that I may switch to video blogs on youtube though. If any of you have any thoughts on this please reach out to me and let me know your thoughts.

Securities Schmurities!

Well, its Wednesday so you all know what that means! It’s time for the term of the week.

This week lets talk a little about the term “Securities”. Now this is an extremely broad term so I will try to keep it as simple as I can. Its one of those subjects you could read about all day and just scratch the surface.

A Security is any tradeable and fungible (able to replace or be replaced by a like item) asset which is traded on some kind of market. Most fall under one of two categories: debt or equity. There are a few fall into a hybrid category but they are much less common. There is an endless amount of debate on the merits and drawbacks of each category of security so keep in mind that certain points in this will be my opinion.

Debt securities: When you are in debt you are in BONDage. Most debt securities fall into the category of bonds. I will go much deeper into what a bond is later but in a quick nutshell these are notes which can be issued by a government (federal, state or municipality) or a corporation which carry the promise of a certain payout at the end or “maturity” of the bond.

The good: Debt securities can often be safer than most equity securities. Due to the fact that you are legally owed a return on your investment, holders of debt securities have a better chance of receiving payment if an entity files for chapter 7 or chapter 11 bankruptcy. Additionally these assets tend to have a slower but less prone to fluctuation increase in value.

The bad: Debt securities often have less returns that their equity securities. The “slow and steady” performance of debt securities can be less exciting than their equity counterparts.

Equity securities: The potential of stocks are limitless! Iv’e always thought that when purchasing equity securities you are purchasing the “potential” of the issuer could be at any point in the future. As you can tell from the first sentence in this paragraph, the vast majority of equity securities bought and sold are stocks. I would argue that equity securities, especially stocks are the backbone of most peoples investments and is the most effective way to grow wealth.

The good: Historically speaking equity securities have had a higher rate of return. Consider the average rate of return for the S&P 500 of 10% annually. Many famous investors such as Warren Buffet are proponents for stock indexes. Essentially if you are betting against the S&P 500 or the DJIA you are betting against the will and resources of the United States.

The bad: Unfortunately there can be some pretty large fluctuations with equity securities. Think of all of the corrections, sell-offs, crashes, recessions and depressions that have happened in the global market since the concept of markets were first conceived. The silver lining to this is that we have always and will always recover.

Like I said earlier this is an immensely broad subject and if you are ever looking to open a can of worms there is an endless amount of information you can read about when it comes to securities. Just remember, there is money to be made in both types of securities but you can make any money off investments if you aren’t in the game. Its much easier to have time in the market than to time the market.

What’s the best cup of coffee you have ever had?

I will admit that a lot of my blog is very objective. I think that most financial decisions and information should be objective. However I realize that we as humans are not very objective. That’s why every once in a while I like to write something that is purely subjective.

Ill start out the meat and potatoes of this post with a simple idea. Price does not correlate with enjoyment. I think a lot of times we equate the quality, and therefore the enjoyment we will have with a certain product with the price we pay for. For many people like me the two biggest culprits of this are coffee and booze.

I could not even begin to tell you how many cups of coffee I have had in my life. From the awful scorched tar they serve on Naval Amphibious Base, Little Creek to a 10 dollar gourmet cup at Safari Coffee in Escondido, CA. I would venture to say that I am in the thousands of cups of coffee in my life so far. But do I remember all of them or even a fraction of them? Absolutely not! Of all of these cups I only remember a few cups. One cup I remember was the cup of cheap Aldi brand coffee I had on my back porch in Escondido the day after I found out I was having my second son. I remember the way the avocado groves looked and how happy I was and the how for some reason the coffee that day tasted amazing.

Its the same way with beer for me. From discount $1.25 bottles of malt liquor to limited edition release bottles of founders breakfast stout. The beer I remember the most is the Tusker I had at the bar 11 Degrees on Camp Lemoniear, Djibouti. I remember having the beer along with a hot dog I brought from the galley and sitting with my buddy Chris.

The point is that sometimes we get so obsessed with having to spend a certain amount in order to be able to enjoy something and to be honest it can effect our financial health. Its kind of like the phrase “Keeping up with the Jones’s” . Are you really spending that much more on that cup of coffee because its a better cup or is it because of other reasons? Remember with certain things it can be possible to have your cake and eat it too.

You don’t have to spend an obscene amount every day on coffee or let you beer budget break the bank in order to enjoy these things. Having a rich life is more than just your finances.

They aren’t all going to be good guys.

Something I’d like to start doing with this blog is giving a “Who’s who” in the financial world on Fridays. I think the best way to learn something is to study someone who is an expert in the area you want to become proficient in. We can learn a lot on what to do and sometime just as importantly what not to do.

On April 29, 1938 one of the biggest villains in the financial world was born. Bernard Lawrence Madoff was born in Queens, New York Ralph Madoff and Sylvia Muntner.

After graduating from Hofstra University with a degree in political science and a brief stint at Brooklyn Law School Madoff started a investment securities firm. (I think he missed the part in law school where they talk about lying to the SEC and defrauding people out of billions of dollars was frowned upon)

The Bernard L. Madoff Investment Securities LLC started out selling penny stocks but through innovative trading procedures it quickly became one of the largest market movers on the New York Stock Exchange. Essentially through the use computer based technology the firm helped to eliminate some of the red tape between investors and over the counter brokers. Many of the techniques and technologies used by his firm is what led to the creation of the NASDAQ, which he served as the chairman of.

The firm quickly grew both in the number of investors and the amount in assets. At the height of the firm it was estemated to be worth about 65 billion dollars. They gained a lot of investors by having a steady return rate of around ten percent. Basically Madoff had found that ten percent was a high enough return to attract investors but not high enough to raise the suspicions of regulators. Although there were numerous whistle blowers who tried to expose him his actions were not exposed until the financial crisis of 2007-2009.

How his massive Ponzi scheme was operating was he would take money for his investors, putting it into a large bank account and then using those funds to pay his clients a fake “interest” return. As long as there was more money coming in from investors than the “interest” payments going out the scheme could have lasted indefinitely.

As the financial crisis was at its height and people were pulling out of investments left and right trying to preserve their capital the Madoff Ponzi scheme came crashing down. The funds quickly dried up and investors learned that all of the statements and gains they were receiving were completely fabricated and fake.

It was actually his sons that exposed him after Madoff came clean to them about what he had been doing for years. After turning himself in and being branded as a financial monster for squandering billions of dollars from investors, Madoff received a 150 years sentence which he is serving in a medium security prison in North Carolina.

There has been efforts to compensate the victims of his actions but so far they have been minuscule compared to the amount they lost.

Madoffs wife was allowed to keep 2 million to live off and unfortunately of of their sons committted suicide and the other died of cancer. I will admit that it could be hard to feel sorry for her because there is speculation as to if she knew what was going on. However I do feel sorry for her and Madoff about their sons. No parent, no matter how awful you are should have to bury your child.

I think the biggest lesson to learn from this is that sometimes when something in the financial world seems too good to be true, it often is. There were many lessons learned by the SEC and they did not come out smelling like a rose.

There is a lot more to read about and there are several videos and news stories you can watch if you are interested.

Not every one in the financial industry is a greedy criminal so I promise next Friday we will talk about one of the heroes of the industry. Thanks for Reading!

Every one has an agenda, except your RIA.

“Your moms a fiduciary!!” Sounds more like a classic junior high insult rather than someone who could greatly benefit your financial life.

As you can probably tell from the the title and the previous paragraph, the financial term of the week is “Fiduciary” otherwise known as a Registered Independent Adviser (RIA).

Take any industry, the health and fitness industry for example. There are a metric Sh*t-ton of people with varying titles, many of them sound the same. Personal trainer, fitness coach, strength and conditioning coach, etc. The financial industry is no different. Wealth manager, wealth advisory, financial adviser, financial manager, retirement planner. All of these terms sounds great, but honestly what do some of these mean? What are the standards they have to meet? What are they obligated to do for you?

The sad truth is in many cases individuals with these titles have no more responsibility to your financial health than a gas station clerk selling you a lottery ticket. In fact many individuals with these title work for and answer to larger firms. Often they are required to sell products from the firms they work for.

Enter the world of the Fiduciary.

A Fiduciary is a type of financial adviser who is legally obligated to act in the best interest of his or her client. Essentially if they screw you over they screw themselves over. It isn’t guaranteed that you will never lose money with a Fiduciary, they arent shamans, gurus or fortune tellers. However like a doctor or lawyer they have to have a reason for doing (or sometimes more importantly not doing something). And when they make a decision it has to be for the benefit of their client.

One thing to be weary of is of the roughly thirty five thousand Fiduciaries out there, many of them are dual hatted as a broker as well. In fact there are only about five thousand financial advisers in the US that are solely Fiduciaries.

One piece of advice that I would give is to plainly ask “Are you acting as a Fiduciary for me?” Don’t be afraid to ask questions, have them explain things in layman’s terms. It can often be a red flag if they get annoyed at questions or get annoyed by having to explain things to clients. Google them and read as much as you possibly can on them. In the end though remember that the person who carries the most responsibility for your financial future is yourself.

We’ve all committed robbery.

Like most of us I made one of the worst financial mistakes out there. I robbed my future self. I took out a loan from my Thrift Savings Plan (TSP). For those of you that don’t know, a TSP is a retirement account similar to a 401K or IRA which is offered to military members and other federal employees.

Just as a little background info, when you take out a loan from your TSP you have to agree to monthly deductions from your pay which go to paying off the loan. These payments are automatically deducted from your pay via the Defense Finance and Accounting System (DFAS). If you are like me and you Expiration of Term of Service (ETS) from the military then you become solely responsible for the payments back to your TSP loan. You can chose to stop making payments on the loan but the outstanding balance is then declared as a taxable distribution, meaning instead of a loan it is then reported to the IRS as regular income which you are responsible to pay income taxes on.

I don’t know what possessed me to do this but one day after I had gotten out of the military and the following year had to take a hit on my tax return I decided to use one of the investment calculators to compare the numbers of my TSP now vs if I hadn’t taken this loan out. The numbers were dismal to say the least. I know other people have gone through similar situations whether it was taking a loan out from their 401K, IRA, CD or any other number of long term accounts.

I realized what I did. I allowed my present self to rob my future self. When you do something like this you are forcing yourself to extend your working life. You have to either make more contributions to catch up and replenish the funds that you depleted or (depending on how much you took out) you may have to delay your retirement. Either way you are putting your future self into a precarious position.

Im not saying that there are not time when taking funds out from one of these types of accounts are absolutely necessary but its something to think about. Are you taking money out of one of these accounts for a want or a need? Do you have any other options? Is it worth it?

Lastly, if you do have to put yourself in this position, don’t beat yourself over it. We all make mistakes and we all get into bad situations in our lives. Pick yourself up, get back in the market and get back in fight.

There’s like a million numbers in here! I’m more of a three number kind of guy.

The first thing I learned when I decided to take control of my financial life is that finances can be incredibly complicated. The second thing I learned is that it does not have to be very complicated. Yes there are a lot of things to learn when it comes to managing your personal finances but like with anything else in life it is usually made up of very small, yet manageable steps. I can almost guarantee if you are reading this you have mastered some kind of skill in your life which is more complicated than improving your financial life.

What I am hoping with this blog is to be the financial “sponge” both to soak up as much knowledge and then to wring out that knowledge on those who read this.

I hope you log on every week to see each new topic and to share whatever insight you may have as well. Remember to keep the good finance ideas free flowing.