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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!


The Fix Is Not In

Hey guys, how’s it goin’?

I was goofing off and read this article on Huffington Post about High Speed Transactions. It’s a scare piece about how computers are being used to take advantage of marginal fluctuations in the market. These computers can execute thousands of trades per second. Ultimately, they only affect the day traders and other investors who operate in the sub-penny margins.

As I’ve mentioned before, I sometimes make the mistake of reading the comments for these kinds of stories. Every time I’ve done it, I’ve immediately regretted it. This time was no different. The comments were filled with categorical statements about how the small investor is screwed because the playing field isn’t level, the computers are taking over, the Wall Street fat cats have bought all of the politicians, et cetera and so on. Although I can’t prove it, I suspect if you combine the portfolios of all these malcontent commenters you’d be able to buy something at the local dollar store.  They’re more interested in grinding axes than participating in an actual discussion, or *gasp* learn something.

As a small investor, I call bullish*t. Contrary to what the know-nothings over at HuffPo have to say, investing is not the bastard sibling of a slot machine. If that were true, there wouldn’t be nearly as many wealthy investors as there are. Sure, there is an element of risk when you invest. Unlike a slot machine, that risk can be greatly reduced if you do your research and take a little bit of care in your decision making.  It doesn’t matter what the High Frequencey Trading computers are up to or which fat cat owns which politician, as long as you are doing your research and putting thought into your investment decisions you’ll do fine.

Until next time, keep on saving!


Nothing to Fear but Fear Itself

Hey guys, how’s it goin’?

When I was growing up, I had to endure the daily proclamation that my mom was going to get laid off any day now.  For as long as I can remember, her entire existence was permeated with the fear of not being able to take care of her kids.  That fear made home life edgy, to say the least.  According to her, the wheels were always in danger of coming off at the next unexpected expense.  An accident left her unable to stand for more than hour at a time and forced her into an early retirement.  When she passed away, she had less than $500.  She lived her entire life either not knowing or not bothering to build up more than a nominal amount in savings.

That’s one of the many reasons personal finance is a very important subject to me.  After many years, I was able to drag myself out from under the fear that drove me to make all manner of poor financial decisions.  Part of turning my financial situation around was resolving to not be put in a position where I would have to deal with the kind of fear I grew up with.  It’s one of the main drivers behind going back to school for my degree.  Today I make a good salary in a high-demand industry that is about as close to recession proof as it gets.  On the off chance I lose my job tomorrow, I have enough savings to pay my bills for six months.  I’m building a portfolio that I hope will allow me to retire while I’m still young enough to enjoy it.  I’m hardly financially bulletproof but I can handle some adversity without going into a tailspin and losing everything.

And yet, I still occasionally feel it.  I feel the anxiety of not having a job tomorrow.  I feel what’s best described as preemptive despair that tomorrow is the day when the wheels finally come off.  The only real way to deal with this feeling is make sure I’ve done everything I can to handle a financial catastrophe.  If I didn’t have a sizable emergency fund, I’d be in much worse psychological shape.

If you or someone you know is like my mom, the only real way to handle the fear of financial catastrophe is to do the kinds of things I’ve done.  Build and emergency fund.  Pay down debt.  Stay out of debt.  Plan for the future.  That fear may never go away, but a little preparation will keep it from owning you.

Until next time, keep on saving!


Don’t Give the Bastards More Than You Have To

Hey guys, how’s it goin’?

I’m expecting my car insurance bill soon.  Even though I paid off my car and I can drop my policy to just liability, I decided to keep paying for the full package.  Maybe not the most frugal thing to do, but it’s better to have it and not need it than need it and not have it.  I spend a lot of time on the road, so there’s lots of opportunities for something to go sideways.  What I refuse to do is give the insurance company one penny more than I have to.

Back in the bad old days, I was forced (by my own financial ineptness) to pay my insurance bill on the payment plan.  Six months of coverage for five monthly payments.  Insurance companies being what they are, it wasn’t enough to charge out the nose for their product, they had to add a $5 monthly surcharge for the privilege of paying on time every month.  What a bunch of sweethearts, eh?

Anyway, one of the first things I did when I started getting my finances together was arrange to get off the payment plan and pay up front for each six-month period.  Fifty bucks a year may not seem like much, less than a dollar a week.  It doesn’t seem like much now, but back when I was getting started, that five bucks each month was appreciated.  That five bucks went straight into my savings and helped put me on the road to financial stability.

You’re going to spend a lot of money on insurance over the course of your life.  It’s the cost of living life.  But there’s no point in paying one cent more than you have to.  It may be a little scary to think of paying out a few hundred bucks on one bill every six months, but if you include it into your monthly bill account you’ll be just fine.

This goes for any bills that offer a payment plan.  If they charge you for the service, you’re better off just saving for it and paying it all at once.  You can put the extra money to better use.

If this post has been helpful to you or you know someone who could use it, pass it on.  Follow us on Twitter, fan us on Facebook, sign up for the RSS feed.  Thanks.

Until next time, keep on saving!


That Financial Voodoo That You Do So Well

Writing about personal finance can seem like a thankless task.  As I bop around the Personal Finance blogosphere, it seems like the community is made up almost entirely of people who are trying their damnedest to pimp their own personal finance blog.  There are some exceptions, to be sure.  But the vast majority of the communication is between personal finance bloggers and other personal finance bloggers.  When you’re stuck in the vast echo chamber of people who are basically repeating the same things back and forth, how do you know you’re actually helping people who need help?  After all, that’s why I started this blog.  I want to help people.  I want to help people who are up against the financial ropes.  I want to help people who are doing okay, but could be doing better.  I want everyone to get their finances together because it makes life easier and more fun.

Don’t get me wrong, I’m just as guilty as the rest.  I have an RSS feed for a bunch of personal finance blogs I read every day, looking for a way to interject myself into the discussion and drive traffic back here.  It’s how the world of internet marketing works, after all.  Ask Gary Vaynerchuck.

Anyway, a guy I know was talking about how he was meeting with a financial adviser who asked him for an outrageous amount of money.  I gave a semi-tongue in cheek answer, “Vanguard Index Funds.  That will be 10%, please.”  As the discussion continued, more folks chimed in and the general consensus was that they all basically either didn’t care or couldn’t be bothered to manage their own finances.  They make good money, but they consider investing (by extension, personal finance) to be beyond them or not worth looking into.  That bothered me, probably more than it should have.  But I don’t want to be the douchebag at the party who starts evangelizing about IRAs and Value Investing, so I let it drop.

These are all very smart people and it mystifies me how they could be so blase about their money.  How do you get to the point where you can’t be bothered to figure out how much money you’re giving away through maintenance fees when all it takes is twenty minutes and some math?  Or spend a couple of hours figuring out which index funds to invest in for the next year?  Or even considering how much of your savings is being eaten by inflation just sitting in a bank account?

Personal finance is something we all need to think about to some extent.  The world is too dangerous not to.  I bet those folks who lost all their money to Enron wished they paid a little bit more attention to what the company was doing.  Bernie Madoff’s victims probably wish they had taken a harder look at what he was up to for all those years.  If you are going to protect yourself from the financial sharks, you really need to know how to manage your money.

That’s the challenge for personal finance bloggers.  How do we engage people the people we should be engaging?  How do we make people care about their finances?  It’s easy to comment on each others blogs and make a few bucks clicking on links.  It’s not so easy to convince everyone else that it’s in their best interest to take better care of their money.


The Rule of Seventy-Two and You

Hey guys, how’s it goin’?

When a person is just starting out with investing, they may be wondering if the risk is worth it.  After all, they can get a high-interest (relatively) bank account at some online bank like ING Direct or a CD at their bank.  Sure, their money may not make the same returns, but it’s a lot safer.  If they have no risk tolerance, they will want to put their money in the most risk-averse vehicles and call it a life.  Of course, as the saying goes, “No guts, no glory.”

For the sake of argument, let’s look at the difference between the returns on no-risk instruments and more traditional, risky investments.  Let’s start by taking a look at something called the Rule of 72.  The Rule of 72 is a way to approximate how many years it will take to double your money.  It’s a simple formula:  72/(rate*100).

Let’s take a look at just how much you’re missing by staying in a low interest vehicle.

  • Scenario 1:  My portfolio is making an annualized return of 10.43%.  Using the Rule of 72, it will take 6.9 years to double my money. 72/(0.1043*100) = ~6.9
  • Scenario 2: I take my current portfolio and invest it into a 1 year cd at a rate of 3.25%.  Using the Rule of 72, it will take 22 years to double my money.  72/(0.325*100) = ~22
  • Scenario 3:  I take my current portfolio and put it into an ING Direct savings account at a rate of 1%.  Using the rule of 72, it will take 72 years to double my money.  72/(.01*100)  = ~72.

While I would like to live forever, I obviously won’t.  At 72 years, the best I can hope for is to leave my money to someone else to enjoy.  Even at 22 years, that leaves me with little time to enjoy the fruits of my labor.  While I may not be able to live high on the hog in twenty years with a 6.9 year doubling period, that’s still a pretty good chunk of change to help pay for things when I’m old.

If you want to be even marginally financially independent, saving is not enough.  You still need to save a significant amount every year, but you also need to find ways to make that money work for you and maximize returns.  For most people, that means investing.

If you found this post useful or know someone who can benefit from it, go ahead and pass it on.  Follow me on twitter, fan me on Facebook, sign up for the RSS feed.  Thanks.

Until next time, keep on saving!


Personal Finance Milestones, Part II

Hey guys, how’s it goin’?

Last post, I talked about dealing with long-term financial goals by creating short-term milestones.  Today, I’m going to go through an example of creating a schedule of milestones.

I have about six and a half years left on my student loan payments.  I took out slightly more than $30,000 in student loans to finish my CS degree.  After three and a half years of repayment, I’ve chipped the loans down to $21,650.  I’ve made a great deal of progress, but I don’t need to tell you that a lot of things can change in six and half years.  You can lose your job, you can get really sick, you can get divorced, any number of things can happen to throw your life into a downward spiral.  One of the best ways to manage these kinds of events is to make sure you don’t have a lot of financial obligations. To reduce risk, I want to pay it off early.  Where do I start?

  1. Make a goal. First, I need to decide on a reasonable time frame.  While I make a good wage, I don’t make nearly enough to pay the debt off outright.  I put a sizable hunk of my income into retirement and other investing.  I also have to consider the money it costs to live a reasonable lifestyle.  While I could put every spare cent into paying off my debt at the cost of the small luxuries that help keep me sane, that’s not much of a life.  After everything has been factored in, four years is a reasonable time frame for paying off this debt.
  2. Make a plan. To pay off my student loans in four years, I need to find my minimum payment.  A good mortgage calculator can do this, but I prefer to do the math myself (with Excel. Thank you, Mr. Chou.)  To pay off the loans in four years (48 payments), I need to make a minimum payment of $451.00 per month.
  3. Write it down. Now I have a preliminary milestone, “Pay $451.00 per month toward my student loans.”

Now I have a set of monthly milestones.  Are they sufficient to stay on track?  Yes.  If I set up automatic payments and make sure the money is always in my bill account I won’t have to worry about it again.  Are these good milestones?  Not really.

  • Is this series of milestones small?  Yes.  But they can be much smaller.
  • Do the milestones have a deadline?  No, not really.  A deadline is usually associated with an actual date.
  • Is the series of milestones specific?  Yes.  But they can be more specific.
  • Do the milestones move me closer to my goal?  No.  The way it’s written now, there’s no indication that these payments will ever end.

Not bad for a first pass at a set of milestones.  They can be greatly improved, though.  What can I do to make them better?

  1. Refine my goal. My student loan total is made up of three different accounts:  $2,575 @ 5% ($43/mo.), $3,415 @ 3% ($86/mo.), and $15,650 @ 4.3% ($232/mo.)  Combined, my minimum payment is $361/mo.  To meet my schedule, I need to pay an extra $90/mo.
  2. Refine my plan. What I want to do is pay off the highest interest rate first, so I’ll assign that extra money to the 5% loan.
  3. Write it down. Now I have a refined payment schedule: $133/mo, $86/mo, and $232/mo.  I also have a new set of milestones.  “Pay $133/mo to Loan 1.  Pay $86/mo to Loan 2.  Pay $232/mo to Loan 3.”

That’s better, but are they good enough?

  • Is this series of milestones small?  Yes.  As opposed to the previous milestones, these are broken out into the individual loans.  Going smaller won’t add value.
  • Do the milestones have a deadline?  Still no deadline beyond the “per month” statement.
  • Is the series of milestones specific?  Yes.  You can’t get much more specific.  Or can you?
  • Do the milestones move me closer to my goal?  No.  There’s still no indication that these payments will ever end.

Looks like another revision is in order.

  1. Refine my goal. I know the overall monthly payment to meet my goal.  I don’t need to do much beyond this.
  2. Refine my plan. What happens when I pay off Loan 1?  To make the goal, I’ll need to push that extra money into one of the other loans.  That needs to be reflected in the milestones.  To do this, I’ll need to put together an amortization schedule in excel.  According to that, I’ll have Loan 1 paid off in 21 payments (02/13), Loan 2 paid off in 30 payments (11/13), and Loan 3 paid off in 48 payments (5/15).
  3. Write it down. With the payment schedule more refined, I now have a new set of milestones.  “Pay off Loan 1 by 2/13.  Pay off Loan 2 by 11/13.  Pay off Loan 3 by 5/15.”

We’ve moved a little bit further down the road.  Are we done?

  • Is this series of milestones small?  No.  By introducing the amortization table, we’ve re-introduced the long-range problem.  Remember, the point of milestones is to create short term goals to accomplish long term goals.
  • Do the milestones have a deadline?  Yes.  Our milestones have deadlines now.  But since the deadlines are so far away, they aren’t much use.
  • Is the series of milestones specific?  No.  We actually can get much more specific.
  • Do the milestones move me closer to my goal?  No.  Even though we’ve introduced the snowballed payment schedule, they still need to be phrased correctly.

One last revision.

  1. Refine my goal. The overall goal is pretty well defined at this point.
  2. Refine my plan. We have a complete plan to accomplish the long term goal.  By creating the amortization schedule, we now have a framework to set up the milestones.  Using the amortization schedule, we can set up a schedule.  For the sake of brevity, I’ll set up a quarterly milestone schedule.
  3. Write it down. Now that I have a quarterly milestone schedule, I need to write it down.  What I don’t want to do is continue saying things like “Pay $133/mo.”  A better phrasing is “Pay Loan 1 down to $2,200 by 8/11.”  Using the amortization schedule, I make a list of balances by quarter until I’ve paid off the loans.  When I’ve paid off one loan, I adjust the schedule moving the money to the next loan, then on to the third loan until it’s all paid off.

It looks like we’re done.  Let’s check.

  • Is this series of milestones small?  Yes.  For brevity, I set them to quarterly milestones.  But with the amortization schedules in hand, I can set them to monthly.
  • Do the milestones have a deadline?  Yes.  By using the amortization schedules, I’ve set up a series of concrete dates.
  • Is the series of milestones specific?  Yes.  By tying the dollar amounts to the schedule, we’ve gotten as specific as we need to be.
  • Do the milestones move me closer to my goal?  Yes.  Now that we’ve phrased them to reflect the amount outstanding rather than the payments, we’re showing progress against the overall goal.

It looks like there is a lot of work up front.  But once you’ve got your milestone schedule set up, you won’t have to do much more with it.  Mostly, just checking them off as they pass.  Another benefit to milestones is flexibility.  If something happens that throws you off schedule, like a month or two of bad spending decisions, you’ll know exactly how to get back on track.

If you found this or any of my other posts useful, or know someone who can make use of it, pass it on.  Like us on Facebook, follow us on Twitter, sign up for the rss feed.  Thanks.

Until next time, keep on saving!


Personal Finance Milestones, Part I

Hey guys, how’s it goin’?

As a software engineer, I work on projects that are rarely as straightforward as the toy programs I made in college.  The stuff I work on is not just internally complex, it’s part of a web of complex interactions with the outside world.  A good sized project can take five years to go from planning to delivery and seem impossibly daunting when they first ramp up.

Same thing with pulling yourself out of a financial hole.  Saving money and getting out of debt can seem every bit as daunting as the most complex software projects.  It’s hard to keep the end goal in sight when that goal is realistically years away.  Repaying your credit card can seem like a Sisyphean Task when you look at your monthly statements.  It’s hard to stay motivated when you are making little apparent progress.  How do you stay on track when your goal is not even in sight yet?  By concentrating on the stuff that is in sight.

In Software Development, companies use the idea of milestones to keep a project on track.  These are smaller tasks that have been broken out of larger tasks.  They give the engineers a concrete, achievable goal that when finished, has moved the overall task forward.  It also gives you a framework to recover when you’ve fallen behind.

What makes a good milestone?

  1. Milestones are small. The best milestone can be met with the least amount of steps.  It’s one thing to say, “I want to save $10,000.00 by the end of the year.”  It’s quite another to say, “I want to reduce my spending by $350 and save $500 out of my paycheck this month.”
  2. Milestones have a deadline. To keep you moving forward, a milestone needs a time limit.  Like in the previous example, there’s a big difference between the end of the year and two weeks from now.  Hitting milestones on time gives you a sense of momentum toward your overall goal.
  3. Milestones are specific. A milestone is not ambiguous.  Don’t say, “I want to have a 10% down payment on a car by the end of the month.”  Instead, say, “I want to have $1,750 by the end of the month.”
  4. Milestones move you closer to bigger goals. A good milestone points toward the overall goal.  If you want to save $10,000 dollars by the end of the year, create your milestones so you show progress.  “Save $850.00 this month,” is not as good as, “Have $3,400 in my savings account at the end of the month.”

Setting up a series of milestones is an effective way to meet your long-term financial goals.  They help you maintain a sense of progress that can keep you motivated when your goals are still some ways off.  They help you track where you are in relation to where you want to be and make it easier to correct your course when necessary.  In my next installment I’ll walk you through an example of my own personal milestones.

Until next time, keep on saving!