Your Take 
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Your Take: Splurge on Experiences or Things?

Jack Harter Helicopter TourWhen I was younger, I used to collect comic books. These comic books are actually in my basement now (my parents brought them on a recent Thanksgiving visit) and they’re relics from a past era for me. When I was younger, I was big on collecting things. I had baseball cards, comic books, comic cards, Magic The Gathering cards, Hard Rock Cafe shirts, etc. I’m pretty sure I liked the idea of having a set more than actually having the set itself. It’s like the idea of not breaking the streak, there’s something compelling about trying to get a collection and accomplishing it.

Fast forward about fifteen years and I no longer feel that urge to collect. In fact, I feel the opposite. I don’t know when the transformation occurred or why, but rather than accumulate things I prefer to accumulate experiences and adventures. I’d rather go on a cruise with my wife and friends than buy a new set of golf clubs (I’m trying to learn), even though I’d get the same level of enjoyment out of both.

Therein also lies my financial Achilles’ heel. While I do hunt for a deal before I go, I’m often pretty loose with money when I’m on the vacation on things I couldn’t get at home. Just recently in Hawaii, we went to a Wal-Mart and actually compared price per unit on something (probably Macadamia nuts) while scheduling helicopter rides that cost $200+ a person. It’s a bit incongruous but my logic has always been to enjoy it while you’re there, it’s not like we’ll be taking many helicopter rides anyway so we might as well do it while in Kauai. (Incidentally, Jack Harter Helicopter Tours was awesome)

Are you a splurge on experiences type of person or a splurge on things? Or both?


 Personal Finance 
4
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Your Pen Holder and Personal Finances

Pen Holder & Personal FinancesThe picture you see is a picture of my jam-packed pen holder filled to the brim with all manner of pens, pencils, highlighters, scissors, Sharpies, and even a fake Mont Blanc pen we found on the flight back from Shanghai last year. Why is my pen holder a perfect analogy for my personal finances? The pen holder is an collection of all the pieces of junk I’ve collected over the years, from the free pens at trade shows to the ones I’ve taken home from the office. There is no rhyme or reason to it, no organization, just everything in one wire-frame pen holder.

Our personal finances, as I’ve learned when I put together our Personal Finance Users Guide, are very much the same way. I have a credit union account with my former employer, I have a bank account from back home in New York, I have a lingering 401(k) account, etc. etc., the list goes on. The fact of the matter, especially when you’re talking about simplifying your life, is that I don’t need all these pens much like I don’t need all those accounts. I have these pens because I’ve accumulated them over the years, which is a bad reason to ahve them.

So, how do I declutter the holder and declutter my personal finances? Easy, just remove the things I’ve accumulated over the past few years and reduce it to only that which I absolutely need. When it comes to pens, I honestly only need a few ball point pens, a highlighter, a Sharpie or two, and the scissors – everything else is going into a bag in the supply closet.

As for the personal finances, I’ve consolidated all my former 401(k)s into my Rollover IRA at Vanguard, closed all the unnecessary extraneous checking and savings accounts, consolidated credit cards, and cleaned up my paper records (shredding anything I didn’t need, it was two big bags worth). All that was after only five years of post-college working life! Now, every account that we’ve kept has had a reason for being there and that’s how it should be.

In the future, I think decluttering my personal finances will be an annual affair along with rebalancing investment portfolios. So, what does your pen holder look like? :)


 Devil's Advocate 
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Save Money, Get A Divorce!

Devils Advocate Logo
This is a Devil's Advocate post.

Marriage is a beautiful and wonderful thing. I just joined the club several months ago and it’s not too bad so far. I’m not saying that you shouldn’t fall in love and spend the rest of your life with someone, I just think that the accounting details make it a raw deal. I’ve talked about how you shouldn’t get married in the past, but if you’ve already let the cat out of the bag and paid for the license, here are some more reasons why you should considering going back to the courthouse to get your money back (it’ll be pricey but think of the ROI!).

(Click to continue reading…)


 Personal Finance 
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Study of the Wealthy Confirms Classic Joke

Money Money MoneyThe Washington Post story today, discussing the findings of Nobel Prize-winning (2002 Nobel Prize in Economic Sciences) behavioral economist Daniel Kahneman, confirmed the classic joke of an American businessman and a Mexican fisherman. You’d think that the more you earn, the more out of life you’d be able to enjoy; however that isn’t the case. More and more studies are showing that happiness has less to do with money and more to do with other factors. First the (not so surprising) findings, then the ironic joke.

Findings

Kahneman found that wealthy individuals, those earning more than $100,000, spent less than one-fifth of their time in passive leisure. Those earning less than $20,000 a year, spent more than a third of their time in passive leisure. The rich spent more of their time doing the required things, such as working, and less of the optional things because they’re trapped in a mental illusion. They focus on getting rich because they believe that when they are rich, they can buy some cool electronics or get daily spa treatments… therein lies the joke. If you want more Kahneman, here’s more goodness on the aspiration treadmill.

Living the American Dream

Fishing Boat
An American businessman was standing at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The American complimented the Mexican on the quality of his fish.

“How long it took you to catch them?” The American asked.

“Only a little while.” The Mexican replied.

“Why don’t you stay out longer and catch more fish?” The American then asked.

“I have enough to support my family’s immediate needs.” The Mexican said.

“But,” The American then asked, “What do you do with the rest of your time?”

The Mexican fisherman said, “I sleep late, fish a little, play with my children, take a siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life, señor.”

The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds you buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats.”

“Instead of selling your catch to a middleman you would sell directly to the consumers, eventually opening your own can factory. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise.”

The Mexican fisherman asked, “But señor, how long will this all take?”

To which the American replied, “15-20 years.”

“But what then, señor?”

The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions.”

“Millions, señor? Then what?”

The American said slowly, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take a siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos…”

###

Touché.

How Rich People Spend Their Time [Washington Post]

(Money by Tracy O, Fishing by xul)


 Cars 
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Buy Costco Gas without Costco Membership

Costco Gas StationsCostco has since closed this loophole so you’ll need a Costco Membership to get gas there.

A friend of mine just tipped me off on this trick where you can buy gas at Costco without a Costco membership. All you have to do is swipe an American Express card first, when you would normally swipe your membership card, and then swipe it again for payment. Afterwards, it will let you buy the sweet sweet nectar of condensed dinosaur bones at rock bottom prices without the $50/year membership. It’s that simple.

Normally, you have to swipe your Costco Card or the American Express Costco TrueEarnings card in order to authenticate in their gas station systems. It appears that you can simply use any American Express card in the authentication phase because the American Express Costco TrueEarnings card is just an AMEX with a Costco bar code.

I’ve confirmed that this works in Maryland and others have reported success in other states (except those that require an attendant to pump your gas, like New Jersey and Oregon). Locate a Costco nearby (check to make sure it has a Gas Station) and give it a try, Costco gas is usually many cents cheaper than local competitors.

(Photo by shindohd)


 Education, Personal Finance 
9
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Graduate Degrees Are Outdated

Penelope Trunk recently posted seven reasons why graduate degrees are outdated that I think every young professional needs to read. Each of the seven reasons are spot on but I wanted to discuss my own experiences with two of them specifically.

2. Graduate school is no longer a ticket to play. “It used to be that you couldn’t go into business without an MBA. But recently, the only reason you need an MBA is to climb a corporate ladder.” I have two graduate degrees – a technical one in software engineering and a vaunted MBA. In the case of the software engineering degree, I pursued it because job prospects for software developers following the dot-com burst were bleak and because it never hurts to get another technical degree. The MBA? I pursued it strictly because my employer paid for it and because it was seen as another item on your resume, a “requirement” to climb that corporate ladder.

I didn’t pursue an MBA because it would teach me the skills required to fulfill a job function, because it wouldn’t, I pursued it because I knew that at some level it would be required to even be considered for some management position (even if that management position would require none of the skills taught in an MBA course… how does marketing or analyzing internal rate of return help in management?).

What’s my point about MBAs? While some companies may require them for management, you don’t actually need one to succeed at your job. Results matter and companies should promote based on results, not degrees on a wall. If you are at a place that refuses to recognize results, go somewhere that does.

4. Graduate degrees shut doors rather than open them. Penelope focuses on the financial aspects of this – the loans you are saddled with preclude you from working at certain places because you can’t afford it. I believe graduate degrees have a pigeonholing effect. When I applied to become a software developer at my last company, I had been doing embedded software development for about six months. In the interviews, the interviewers focused on the fact that I had been working in the embedded development world for “so long” and how I might not want to or even be able to do application development. Luckily they called me in so I could resolve their concerns because, based on six months of work (it appeared longer than six months because I used the same language, C, for various applications, the last of which was truly embedded development), they had pigeonholed me as an embedded software developer who was disinterested in, or incapable of, application development.

Imagine if you spent a year or two pursuing a degree in a very specific area within your field? Employers would naturally assume you have a singular focus and would only consider you for positions directly related to that field. You might have only gone after that degree because you thought it could broaden your horizons, not make it more narrow.

Lastly, I submit another reason, the eighth reason, graduate school can be outdated.
8. In many graduate programs, the bulk of the teaching is done by textbook. While in some fields this is acceptable, I found that the textbooks used in our business classes were woefully inadequate. We had marketing textbooks that appeared to have last been refreshed in the early nineties, discussing case studies of companies that no longer existing, and really teaching us little that could be applied in the real world anymore. You can learn more reading the nuggets from Seth Godin’s blog, for free, than you can get out of most marketing textbooks.

Finally, and this is unrelated to graduate degrees being outdated, is the fact that there are two things of value when it comes to graduate school and neither involves the knowledge. First, you will, hopefully, increase your network and, second, you’ll get a piece of paper. If graduate school was about the knowledge, you wouldn’t be able to take classes for free from resources like MIT OpenCourseWare and BusinessWeek Small Biz.

I hope you don’t leave here thinking I’m cynical about graduate school or an MBA, I’m not (that cynical), but it’s like what Brian Flanagan (Tom Cruise) said in Cocktail to his professor after a bad grade: “Those that can, do. Those that can’t, teach.” :)


 Insurance 
6
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Engagement Ring Appraised & Insured (Finally)

Napolean 1 Diamond NecklaceOver a year ago, I wrote about how we were going to get my lovely wife’s engagement ring appraised and insured that weekend. Well… ha ha, as all things are, it took a little longer than anticipated but we finally got it appraised in May and insured last week (yeah yeah, over a year later).

We eventually had it insured through Jewelers Mutual Insurance, recommended by the appraiser at Edward Arthur (where the piece was appraised). I had called up Traveler’s, our homeowner’s insurance policy underwriter, and received quotes that were similar priced. The logic was that, given the same premium, we should go with a company that deals with jewelry related claims on a regular basis rather than a general insurance company. Another reason was that in this case, a jewelry loss would have no effect on our homeowners insurance premium.

Replacement vs. Dollar Value Coverage

The type of insurance we purchased was for replacement coverage. That meant that if we did suffer a loss, JMI would replace our covered jewelry with something similar or better. The other option is where you get the dollar value of the appraisal. So if your piece was appraised at $5,000 and you somehow lost it, you would be compensated $5,000 for your loss.

Premiums

As I was filling out the form, I started playing with the deductibles, coverage amounts, and “other factors” to see how they would affect the premium. For the sake of simple math, I put in the dollar value of the piece of be $10,000 and found that the difference between a $5000 deductible and a $1000 deductible was a mere $7 a year (8%). The premium went from $84/year for the $1000 deductible to $77/year for the $5000 deductible, though that does represent an 8% difference. This may seem like very little but the reason is because the item covered was an engagement ring/wedding band set that is worn daily. You could have no safe or an 80 lb. anchored floor safe with a digital lock, sharks with lasers, and your premium would not change because the piece is worn daily. (I made up the sharks part, but it’s likely that would have no effect)

That’s when I decided to have some fun and put in a $10,000 necklace that is worn only for special occasions. If you had no alarm, no safe, and just kept it in a hiding place while you weren’t wearing it, the premium would be $131 for a $1000 deductible and $120 for a $5000 deductible (9% difference). However, in changing the “other factors,” the premium didn’t change at all. Keeping the necklace at a safe deposit box at a bank still had a $131 premium. You could have an armed killer robot guard wear your necklace while you weren’t wearing it and it would still cost you $131 a year. It could be that those factors don’t affect the application’s calculator, since they are subject to verification, but it seemed like they should add a note if that was the case.

Unscheduled Jewelry Insurance

The items that you specify for coverage go on a “schedule.” Usually you have your more valuable or expensive pieces put on the schedule because you’ve had them appraised and would like insurance. Unscheduled is everything else and you can get a catch-all coverage for all those. At JMI, the coverage was $1000 with a $100 deductible for $15. If you wanted more coverage, it’s essentially at those intervals ($2000 of coverage with a $100 deductible cost $30/year). We didn’t elect this coverage.

Application Process

The application process was a piece of cake. You can submit all the details online through a slick Flash-like form and then email, fax, or postal mail your appraisal forms to JMI for verification. Within ten minutes we had coverage, very technology friendly so far.

Knock another one off the checklist, albeit a year-plus from when we put it on. :)

(Photo by dbking)


 Cars 
11
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States with Hands Free Laws

California recently joined the states that make it illegal for you to drive and use a cell phone without a hands-free set, which led me to wonder what other states also make it illegal for you to use a cell phone without a hands-free device. The states that currently have universal handheld bans include: California, Connecticut, Washington DC, Illinois, Massachusetts, Michigan, New Jersey, New Mexico, New York, Ohio, Pennsylvania, and Washington. Of that list, five prohibit their use state-wide while the others prohibit it in certain areas. Chances are, unless you live there, you’ll be driving into and out of various areas so you might as well treat those states as state-wide rather than jurisdiction specific. (Text messaging itself is also prohibited in four states so far: Alaska, Minnesota, New Jersey, and Washington.)

I’ve colored the states with hands-free bans in red, states with local/regional hands-free bans (not state-wide) in orange, in the map below:
USA Map Cell Phone Ban

One important bit of advice is that they are all primary enforcement – meaning a police officer can stop you for this offense alone. If they see you on your cell phone without a hands free set, you can get pulled over. (the only exception is Washington state)

I suspect that more and more states will begin instituting hands-free laws since they’ve been shown to reduce accidents, something we can all agree is a good thing. Also, NPR reported that in the first year of the NY ban, they were able to collected $27M in fines. I’m sure the bean counters in City Hall were pleased, it’s a good way to raise a little revenue.

Teen/Novice Driver Cell Phone Ban

There are also states that prohibit novice drivers, such as teenagers and those with learners permits, from using cell phones at all. Those states are California, Colorado, Connecticut, Delaware, Washington DC, Illinois, Maine, Maryland, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, South Carolina, Tennessee, Texas, Virginia, and West Virginia.

Data provided by the Governors Highway Safety Association but the artistic map was all me. :)


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