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Posts from the ‘General’ Category


Education: It Can’t Be Taken Away

Hey guys,

I’m starting a new job in a little over a week.  During my layoff, I spent my time learning how to make iPhone apps.  See here and here for the shameless plugs.  Alas, there isn’t as much money in iOS development as you’d think.  Don’t get me wrong, they both sell pretty well.  They just don’t sell well enough for me to live on at the moment.  But that’s cool.

My new job is doing iOS app development for a small local business.  I got the job because I taught myself how to make iOS apps.  That, and I brought two apps to market on my own.  I know stuff that is pretty valuable to know these days.

If you want to get ahead, it’s important to know stuff.  What you need to know varies according to your circumstances.  Being able to execute on that knowledge is important, too.  Just not as important as having the knowledge.  A job can be lost.  Tools can be stolen.  Equipment can fall apart.  Knowledge of how to do something can’t be taken away.  As long as you know how to do something, everything else can be worked out.

I used to drive tour buses for a living.  Admittedly, it wasn’t much of a living.  It was work, though.  And it was work that couldn’t be done by just anybody (CDL licenses are not that easy to come by.)  To this day, if everything else fell apart and I had to start from square one, I can make a living driving a bus.

Years later, I finished my degree and now I know how to write software.  I may have turned in my company computer when I was laid off last December, but I didn’t have to turn in my education and experience with it.  I was able to leverage my education and experience into some modest side income and a new job.

While having a formal education will tilt the numbers in your favor, you don’t necessarily need one to live a satisfying life.  There’s all kinds of ways to learn stuff.  Especially these days.  As long as you’re acquiring knowledge on a regular basis, you can’t help but succeed.


Change is Hard

Letter to my Struggling Baby Business (via unicornfree)

Although this is not strictly about personal finance, the general theme is applicable to anyone going through a major change.  Be it personal finance, healthier living, or starting a business.


Securities Investing: Keep it Simple

I’ve recently been looking at my stock portfolio.  I’m going to be back to work soon and I want to get a jump on what I want to buy when my full income kicks back in.  I’ve also been paying attention to the personal finance blogosphere again.  Nothing much has changed.  People who are talking about stock investing are really just talking about gambling or they’re talking gibberish.  So I thought I’d share a few details about my portfolio.

I started my portfolio around April 2010.  I spread $5,000 over six different stocks and have been making regular buys up until my layoff last December.  As of yesterday (Feb 24, 2012) I am approximately 13.5% up with an approximate 7.4% annualized rate of return on 10 individual stocks.  In an insanely volatile year for the market, I still managed to make a few bucks.  How did I do it?

I kept it simple.  I don’t get into options trading.  I don’t do forex trading.  I don’t do arbitrage.  I don’t do derivatives.  I don’t day trade.  I don’t speculate.  I don’t do any of the things that are really just gambling on the market.  I keep my risks low by being a strict value investor.

As a value investor, I follow the axiom of “Buy great companies at attractive prices.”  Of course, the trick is figuring out what a great company is and then what an attractive price is.

Figuring out the greatness of a company generally has a qualitative and quantitative component.  The quantitative component is the answer to the question, “Does the company make money consistently?”  The qualitative component is whether the company has an enduring competitive advantage.  When both of these components are affirmative, you’ve found a great company.

That leaves the question of what an attractive price is.  First, you need to find the intrinsic value of the company.  Once you’ve figured that out, you can figure out what discount you are comfortable with.  I generally require at least a 30% discount against intrinsic value.

In my opinion, this is the minimum amount of research you need to do when selecting individual securities.  If you aren’t willing to do this, you should just stick to index funds.

If you are willing to do that kind of research, take a look at the books listed in the Amazon affiliate box to your right.  Those are the foundational books I built my investment strategies around.

Thanks for reading.


To LLC or not to LLC? That is the Question (Part 1)

I was recently asked about how to start up a LLC.  A friend is thinking about investing and is curious about how to set one up.  I figured I’d share my thoughts on the subject and relate my experiences as the sole member of Bag of Holdings, LLC.

*Disclaimer:  I am not a lawyer or tax professional.  It would be foolish to do anything based solely on what I have to say about the subject.  Also, my experience has to do with a single-member LLC.  There are other configurations that may be more useful to you (LLP, S-corp, C-corp.)  I may talk about those at a later date, but not on this day.

Before getting into HOW to start a LLC, a more important question is “SHOULD I start one?”  The best way to determine that is to look at what an LLC does and doesn’t do.

  • A LLC does provide personal asset protection.  If you are starting a business, a LLC gives you a solid demarcation between your business assets and your personal assets.  If something goes wrong with your business or it gets in trouble for whatever reason, only the assets held by the LLC can be attached.  Your personal assets cannot be used.  For example, let’s say you own a deli through a LLC.  If someone gets food poisoning from your egg salad sandwich and dies, their survivors can sue the deli and will probably take all of the assets held by the deli.  But they can’t take your personal assets like your car, home, retirement fund, etc.  If you own that deli as a sole proprietor, then everything you own is fair game.
  • A LLC does provide flexibility.  When I first started Bag of Holdings, all I was prepared to do with it was invest.  I knew I was going to branch out sooner or later, even if I didn’t know what that was going to look like.  With BoH, I have an infrastructure set up to support this diversification.  For example, I just published an iPhone app and I have another one in development.  I have a very modest affiliate income through the websites I currently publish.  I have dividends through my stock portfolio.  I do occasional consulting work for iOS apps.  I am also working on a real estate investment that should provide a modest return.  It’s nice to have a single bucket to pour my different income streams.
  • A LLC does NOT provide complete asset protection.  When I was researching creating a LLC, I came across countless stories of people who use their LLC as a haven for personal assets.  Everything was paid for out of LLC funds and everything they “owned” was in the LLC’s name.  Many people were also under the impression that if they got sued personally, the LLC would protect their assets.  I did some more checking and found out that this is not the case.  The asset protection is only one way.  The LLC protects your personal assets from your business, it doesn’t protect your business assets from you.  In the eyes of the law, your LLC is a personal asset.
  • A LLC does NOT provide special tax privileges.  A LLC is considered a pass-through entity when it comes to taxes.  That means whatever profit you make under your LLC is reported on your personal taxes.  If BoH makes $1,000.00 this year, I’ll have to report it as income above and beyond whatever my salary turns out to be and pay the taxes on it, even if I don’t withdraw a penny from the BoH bank account.  I’ve read about all kinds of ways that people have tried to use the LLC as a way to manage their taxes, from buying a computer through the LLC and leasing it back to themselves to leasing a car under in the LLC’s name so it can be written off.  I don’t recommend any of those of things.  First, no matter what anyone says or how long they get away with it, it smells less-than-legal and should be avoided.  Second, it introduces a whole level of complexity to something that you want to keep as simple as possible.  Don’t get me wrong, you will be able to write off legitimate business expenses like web hosting and design work.  It’s just not a good idea to get fancy about it.

Now, with all that in mind, should you create a LLC?

For my friend who wants to use a LLC just to buy securities, I’d advise against it.  Owning stock already has asset protection baked into it and it doesn’t provide a tax advantage over just having a brokerage account in your name.  Better to save the filing fees.

If you are starting a business or investing in something like real estate that doesn’t have built-in asset protection, it’s the first thing you should do.  Putting that wall between company assets and personal assets is essential.

If you’re looking to game the system, don’t.  Using a LLC to hide your personal assets and/or avoid taxes, no matter how clever you think you are, is a suckers game.  The IRS (or your soon to be ex-wife’s lawyer) is smarter than you and has a way bigger hammer.

Thanks for reading.  Questions, comments, criticisms, things I missed or am just wrong about, leave a comment.


How to Use (and not use) Your Time

Seen on facebook:

Has offically hit 1 million gold in Skyrim!!!!

For those of you not interested in what young men do with their time, Skyrim is a giant video game.  As a comic book geek, I must sometimes sit through rambling descriptions of just how awesome this game is.  Apparently it’s really expansive and involved and the graphics are “amazing.”

Skyrim was released to much ado around the middle of November 2011.  During that time, I was working on my Wrestling Scorecard iPhone app, ultimately released at the end of January 2012.

While my friend above was making millions in the Skyrim adventuring business, I have sold a modest number of units for my app.  And I didn’t have to spend hours plugged into a video game to do it.

Therein lies the secret to financial stability.


Paranoia is not an Investment Strategy

Warren Buffett:  Why Stocks Beat Gold and Bonds

Over on Y-Combinator, the gold bugs and liberterian survivalists are going bugnuts about anyone, even a seasoned investor like Warren Buffett, daring to say that gold is not the best investment opportunity since sliced bread.

In my opinion, based on nothing but my layman’s observation, the money has long been taken out of gold.  The growth rate of prices are more a reflection of political paranoia than any rational valuation.  Political opinioneers working at the behest of their paid sponsors have been whipping this paranoia up for years.  After all, who do you think is supplying the product that the gold bugs and libertarian survivalists have been buying?

If you’re buying gold because you think the price’s growth rate will be sustainable, I’ll just say that timing the market is a fools game.

If you’re buying gold because you think society is on the brink of collapse, cash out some gold to get therapy.  And it probably wouldn’t hurt to stop listening to people who are sponsored by gold companies.


You Probably Don’t Know What You Think You Know

If you don’t mind some vulgarity, this article is pretty good:  6 Logical Fallacies That Cost You Money Every Day

To most people, Logic means “Anything I say is logical.”  But if I put a truth table in front of them or asked them to tell me what the slippery slope fallacy is, they’d just stare blankly.


Getting Admission to the Walled Garden

Hey guys, how’s it going?

Today, I spent the day adding some minor functionality to my nascent app and getting started on the process of releasing an app to the app store.  Apple is very protective of their app store and puts any potential developers through a vetting process before you’re even allowed to download an app onto a development machine for testing.  I have to fax them a copy of my Certificate of Incorporation and hope they don’t take too long getting back to me about it.  I want to submit to the App Store by December 14.

The app isn’t related to personal (or any other kind of) finance.  It’s a very niche app that I’m doing more for my partner than for anyone else.  Although it turned out to be a much larger effort than I anticipated, it’s done a pretty good job of getting me started up the learning curve for developing in Objective-C and the process of submitting an app.  The next app I’m planning will be more of a personal finance app.

Thanks for reading, guys.


Out With the Old, In With the New

Just got back from my last visit to the office for a while.  I had to turn in my badge and remote token for the client and make sure everything is straightened out on my desk.  All of the apparent loose ends are tied off and I’m ready to be unemployed for a while.  Tomorrow is the beginning of the grand experiment.

Scratch that.

Tonight is the beginning of the grand experiment (which has actually been going on since I saw the layoff coming a couple of months ago.)

So what’s the grand experiment?  How many stable income streams can I create in three months?

The first phase of the experiment is an iPhone app I’ve been working on for the past couple of months.  I have a couple of bugs to work out, but it will be deployed on my beta iPad this weekend.  Then I have to work on the gui.  The target release date (or at least submittal to the app store) is Dec 14.  More details to follow.

Time to get back to it.  Later, guys.


Layoffs: Turning Crisis Into Opportunity

Hey guys, how’s it going?

It’s been a while since I posted here.  There were a couple of reasons.  I suppose the biggest reason is that I just ran out of important things to say.  I’ve started 30 posts since the last one but they all felt hollow.  Like I was just talking to hear myself talk.  While that’s supposed to be good for your site (more articles -> more visitors -> higher possibility of revenue) it just left a bad taste in my mouth.  I also felt disillusioned about the personal finance online community.  It feels like just a bunch of personal finance bloggers talking to each other and occasionally clicking a link.

Another big reason has to do with the title of this post.  I was incredibly busy at work.  When you’re working 10-12 hours a day and driving 3 on top of that, it’s hard to muster the energy to write up a half-baked essay restating what you’ve said before.

As you’ve probably guessed, I’m not quite as busy as I was last week.  I got laid off from my regular job.  But I’m okay with it.  I’ve spent the last 4-1/2 years burning myself out at this job, so I’m not terribly disappointed.  You could even say I’m eager to stop collecting a paycheck for a while.  How can I be so cavalier about it?

  1. Preparation.  The prospect of losing your job (even temporarily) can be stressful unless you’re prepared for it.  The difference between me and 10 years younger me is that I’ve been preparing for something like this for years.  I’ve been maintaining my emergency fund and growing my regular savings for a long time now.  This gives me a pretty good cushion for paying bills during my downtime.
  2. Spending Discipline.  Before I finished my degree and got the job I was just laid off from, I was making crap money working temp jobs.  Just surviving on the money I made was difficult but hardly impossible.  Now I have some old skills in the toolbox that I can dust off and start using again.  While I have enough in savings to maintain my pre-layoff standard of living for a few months, I can go a whole lot longer if I cut back on my spending.
  3. Time.  Now that I don’t have to dedicate 12-15 hours a day towards the regular job, I have time to pursue other interests.  Some of these interests even have the potential to generate some income.  This is the thing that I’m most excited about.  The goal I’ve set for myself is to get some income streams set up independent of my regular job.

I’m probably going to re-purpose this blog away from a purely personal finance perspective.  Turns out I have lots to say about other subjects and now that I have time to do it, why not?

That’s what I’ve been up to.  Thanks for reading!