Personal Finance 
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The Smartest Financial Advice Ever

CNNMoney.com asked forty famous people for their best piece of financial advice. You’ll hear answers from the likes of Bill Miller, Derek Jeter, Jon Barry, Steven Levitt, and even advice from Rodney Dangerfield. In the beginning of the slideshow, the photos are of the respondents but as you get closer to the end it’s photos of the origins of the advice; you’ll know what I mean when you get there.

Unfortunately, they didn’t ask me, otherwise this is what I’d say about the smartest financial advice I got:

The smartest advice I ever got from my parents was to always work hard. My dad once told me that I was one of those people who could complete a fifteen minute job in ten minutes. As I basked in the compliment, my dad told me that what would separate me from the other people who could do the same thing was what I did with the other five minutes. Everyone has talent in something, but not everyone has a work ethic. A strong worth ethic is what separates the great from the merely good. I can’t say I disagree.

Here are my favorites from the slideshow:

Elizabeth Gilbert: Swear off debt.

Elizabeth Gilbert is the author of Eat, Pray, Love, a book my wife has read and really enjoyed, and I thought this bit of advice from her parents was a gem. Her father passed along this message from her grandfather: “Borrowing money is like wetting your bed in the middle of the night. At first all you feel is warmth and release. But very, very quickly comes the awful, cold discomfort of reality.”

In Taiwan, and China, the concept of consumer debt is only a recent phenomenon. Until the last five or ten years, the idea of a credit card was foreign in Taiwan. My father told us a story about when my parents bought a home on Long Island that my grandfather wanted to give him the cost of the home (this was nearly thirty years ago). My dad explained to my grandfather that he could put 20% down and borrow the rest, a concept that made no sense to his grandfather. Why borrow money? Just keep saving and saving and saving until you can afford it. It’s amazing how pervasive consumer credit has become in such a short time.

Derek Jeter: Know where your money goes.

Derek Jeter is the shortstop for the New York Yankees and considering the size of his paycheck, it’s amazing this was the advice he thought of. I think it’s valuable because as we get older, the finances get more complex and you begin relying on more and more experts. We now have an accountant that handles our taxes, we leaned on a real estate agent when we bought our house, we’ll have to rely on the expertise of numerous subject matter experts as we grow older but it’s always important to be part of the process.

Chris Larsen: Take risks when you can.

Chris Larsen founded E-Loan.com and Prosper.com, two hugely successful and innovative companies in the lending industry. This bit of advice came from Jim Collins, author of Built to Last, Larsen’s MBA professor at Stanford. “You’re young. You can fail two or three times, even lose all your money two or three times, and you’ll be just fine. Taking that risk puts you in the path of wealth.”

In my MBA, I received similar advice from my Entrepreneurship professor. He said that, especially if you’re young, you should be willing to take risks and try paving your own way. It’ll be hard, you might fail, but the worst thing that can happen is that you go back and get another job.

There are a lot of good gems in there including appearances by Freakonomics author Steven Levitt, Four Hour Work Week author Tim Ferriss, and many many others.

The smartest advice I ever got [CNN Money]


 Cars 
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Best Gasoline Station Has Best Gas?

Old Fashioned Gas PumpIn the current world of $4 a gallon gasoline, everyone is looking for an edge. Whether it’s additives that don’t really work or little gadgets that don’t really work, we’re looking for anything that will squeeze out a couple more MPG from the car we already have.

The next logical step is to ask whether the gas at various gas station companies makes a difference. For the longest time, I believed that the gas from Exxon was better than the gas from Costco. I did empirical studies where I saved my gas pump receipts and calculated my average MPG and the Exxon gas did give me 2-3 MPG extra. However, after further research, I believe that my driving behavior and routes had a greater effect on fuel efficiency than the label on the pump.

The gas from one company is essentially identical to the gas from another.

Government law requires that all gasoline certain detergents that help prevent fuel injectors from clogging. This means that all the fancy brand name gas stations and their fancy “additives” are all required and that all gas contains them. Some say that the detergents from brand name companies go above and beyond but my perspective is that you only want the minimum standard, which is required of all gasoline. Why do you want more detergent than you really need? I don’t want more detergent in my gasoline, I want as little as possible because that gives me more gasoline! (I’m only kidding, the added volume in detergent is tiny)

Many gas brands share pipelines. According to a Smart Money article on what Gas Stations Won’t Tell You, Chevron gas stations might sell gas refined by another company like Shell or Exxon Mobil, with the difference between their gas being a quart of detergent added to an 8,000 gallon tanker truck! After a little digging, I found these maps of pipelines in the US and there aren’t that many pipelines. There are certainly as many pipelines as there are gas brands, so the fact that they mix and match isn’t that surprising.

If there was a difference, we’d know about it by now. The power of the free markets is very strong, if a particular brand of gasoline was definitely superior, we’d know. We’d know because it would be more expensive because the higher performance would justify the higher cost. Since there isn’t a brand that exists with significantly superior performance at a higher price, it’s clear that they’re all pretty much the same (and these brands have been around for decades).

If you really want to make a difference, you can save more money by buying the cheaper gas and then adding a fuel injector cleaner with every oil change. I’ve used many a fuel injector cleaners, which you can find in any auto parts store, but can’t really say I can tell. The mechanic friends of mine say that while it can’t hurt, don’t bother getting expensive cleaner, just get the cheap stuff.

Oh, another tip, don’t buy higher octane than you need, it’s a waste of money.

(Photo: ella_marie)


 Government 
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Another Stimulus Check? Perhaps.

Another Economic Stimulus Check?Update: Here’s the latest on the second stimulus package.

When Democratic Presidential hopeful Barack Obama mentioned a second stimulus check in a speech in early June, I didn’t think that it would actually happen. Presidential nominees do a lot of talking in the months leading up to November and I chalked the idea of another stimulus check as a short term as just that – talk.

Well, turns out that the Democrats, led by House Speaker Nancy Pelosi, want another stimulus check. As expected, the Republicans are firing back, President Bush is asking that we “wait for the stimulus package to fully kick in,” and it’s simply business as usual in Washington.

I have mixed feelings about yet another stimulus check. On one hand, I understand that there are many families on the boundaries getting squeezed by soaring fuel and food prices. On the other, I don’t think the “stimulus package” is really stimulus at all and I don’t really think a stimulus package is the solution to our economic woes. Overall, I think it’s just political maneuvering and time that would be better spent on more important issues like education, medicare care, or climate change.

At this point, it’s merely political fodder and we shouldn’t expect another stimulus check, just that there have been discussions of one. As anyone who has watched Congress work can attest to, there are plenty of discussions in Washington that lead nowhere.

Democrats plan second economic stimulus bill [Associated Press]

(Photo: daquellamanera)


 Frugal Living 
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5 Reasons to Start Your Own Garden

(Not My) Home Vegetable GardenEarlier this year, my wife and I started our second annual garden project, after taking one year off, by planting several eggplant plants, tomato plants, and pepper plants in pots on our back deck. So far the project has been quite successful and many thanks to those who have been writing in with their suggestions and ideas. I never had a garden growing up, my wife never had a significant planter garden (growing plants in pots rather than in the ground), and we didn’t have a good idea whether a garden would even succeed on our deck. We failed to remember or record what happened two years ago but I am certain we didn’t plant as many vegetables as we did this year.

So far, the garden project has been a success and one we will definitely continue next year. By writing about it, I also get to record all the things we’ve learned and re-read everything later (along with the valuable comments!). So, if you’re considering starting a planter garden of your own, let me give you five good reasons why you should give it a try.

Be Self-Sustainable

We decided to go all out on our garden this year because we spent our honeymoon in Hawaii. How is that related? Fruits grow like crazy in Hawaii, something about the volcanic enriched soil and the gorgeous weather I suppose, but residents have all types of fruit trees and plants on their property. We stayed at a couple of bed & breakfast type places and at least half of the morning fruits were picked from the trees and plants in the yard. We had bananas, papaya, pineapple, and even some fruits I had never heard of before (and everyone owns chickens there too!).

The thought of being self-sustainable was very appealing. Why go to the store and buy something when I can grow something to eat? I really enjoyed “living off the land” while in Hawaii and this was a small reminder of that.

It’s Therapeutic

One of my friends recently asked me if tending a garden took a lot of time. If it does, I don’t see it as a chore. Every night I water the plants, making sure the little guys get enough to drink, and every few days I check on the plants themselves to make sure they’re still happy. Sometimes I pinch off a few leaves or retie a tie, but it’s a welcomed diversion from the daily activities.

Remember bonsai trees? Those were all the rage once and the appeal of tending a bonsai tree was the therapeutic benefits of trimming a little tree. (I still remember the Saved by the Bell clip showing Mr. Belding killing his tree!) Taking care of your garden is very much like that. You take a few minutes to check up on your plants, pinching off leaves, cutting off fruit, and letting your mind take a little break.

Sense of Accomplishment

Tending a plant so that it bears fruit is never easy and is always a learning experience. We had a little problem with bottom rot on some of our Roma tomatoes a few days back, I asked a few friends and many of them came back with great information. We, mostly our friends, concluded that the tomatoes were deficient in calcium but we couldn’t fix it because we couldn’t find a vendor, within reasonable distance, that carried the supplement. We also concluded that we simply packed too many tomatoes into one pot (3 in one instance) and they were starving each other out (unfortunately there isn’t much we can do about it).

But, the beefsteak tomatoes and the other Romas, in their own pots, are all growing nicely right now. The eggplants and orange peppers are also growing very well. Watching them get bigger and bigger really gives us a sense of pride, that we were able to grow it, and will probably increase our enjoyment of the bounty. Anyone can go to the store and buy eggplant, not everyone can grow it themselves! :)

It’s Safe

First it was spinach, then it was scallions, then it was tomatoes, (and now jalapeños!)… seems like there are outbreaks of salmonella or other bacteria every few months because of the industrial/commercial fertilizing techniques of major companies. When you grow it in your backyard and can control the process, you it’s very unlikely that you’ll introduce salmonella or other harmful bacteria. While growing every piece of fruit or vegetable you’ll eat isn’t going to be possible for most people, growing as much as can certainly can’t hurt!

It’s Cheaper!

It wouldn’t be a personal finance blog if I didn’t talk about money right? Sense of accomplishment, sustainability, and safety are all great reasons but the bottom line is the bottom line. In our economic times, a big reason for growing your own garden is for the cost savings. In our garden, we spent approximately $30 on plants and will easily pay for it in terms of vegetables grown. While we will track the yield and the cost savings, I’m confident saying that we will clear that and likely clear the cost of the dirt and extra planters as well.

Why is it cheaper? It costs more time. You’ll have to spend time potting your plants, watering them, taking care of them, and then harvesting the vegetables. It’s a significant number of hours, especially on the front end when you’re potting, but definitely worth it. While it’s faster to drive to the grocery store and pick up what you need, growing it yourself is a lot more fun.

Try it!

(Photo: socfool)


 Banking 
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Beware False Indicators of Bank Health

People Line up at IndyMac After FailureWith IndyMac being taken into conservatorship, a lot of folks have been researching FDIC insurance and how best to protect their assets. I know I was checking all the bank ratings and announcements, looking to see if I should be worried about my assets at banks like E*Trade, ING Direct, Emigrant Direct, and HSBC Direct.

Common sense tells me that my research was unnecessary because I don’t have assets above the FDIC $100,000 insurance limit. As long as you don’t, your assets are safe. If the FDIC insurance program ever failed to protect assets up to that limit, we’d have much bigger issues to deal with. However, I wanted to get a sense as to whether recommending any of those online banks was still a smart idea. I don’t want to tell my friends that HSBC Direct is great only to find out that it’s going into conservatorship tomorrow! They already make fun of me for having a “blog.” :)

Anyway, in doing my research, I saw a lot of false indicators of bank health. These are ideas I had in my own head, like checking Bankrate’s ratings, seeing how old the bank was, the stock price, and whether it had any brick and mortar locations I could visit.

Sadly, I realized that none of these indicators were strong assurances that a bank was safe. Let’s look at each of them.

Bank Age

Banks aren’t like people, they have turnover, their personality changes, and the company you knew 80 years ago isn’t the same one that operates today. In 1995, Nick Leeson brought down Barings Bank, the oldest merchant bank in London with origins back to 1762 (and the Queen’s personal bank and the financier of the Napoleonic Wars), through futures trading and fraud. It was absolutely stunning when it happened since it was all the work of one trader (you can see a depiction in Rogue Trader with Ewan McGregor).

Barings Bank RIP (1762-1995).

Brick & Mortar Locations

If you were aware of online banks when NetBank failured last year, you probably got a little spooked. I know I was spooked a little. When junk hit the fan, there wasn’t even anywhere for anyone to go!

Whether or not the bank has a physical location isn’t a good indicator of a bank’s health. There are several banks that are entirely online, or extremely limited physical presences, such as ING Direct, that are, by all other measures, perfectly safe. IndyMac has physical locations, as the latest news reports have shown, and that didn’t help at all.

Ratings

Bankrate has a Safe & Sound rating for banks and credit unions that is a good indicator of a bank’s soundness in most cases. A rating of 1 (Superior) is better than a 5 (Lowest Rated) but neither score is really a good indicator of whether a bank is going to fail. The problem is that failures can occur extremely quickly (“The second lesson of IndyMac is that it underlines the speed with which banks can go under once confidence in them is lost.”) and Bankrate, along with many other rating services, might not update fast enough to catch the changes.

Here is the disclaimer from Bankrate’s Safe & Sound site: “Events occurring after safe & sound CAEL ratings and reports were prepared and before they are updated as scheduled may have altered an institution’s financial condition. For example, the FDIC reports that approximately 280 banking institutions were impacted by Hurricane Katrina.”

Sagging Stock Prices

IndyMac’s stock fell as it failed, much like the stock of any company going under. You might be tempted to think that a rapidly falling stock price is a good indicator of whether a bank will fail, just as how a rising stock price is a good indicator that I won’t. Sadly, the falling stock price is merely a trailing indicator because it lags what the market knows. The prime example is of all the banks and financial companies pulling money out of profits to protect against potential future subprime losses. Washington Mutual, National City, and M&T Bank all had big falls this week because of market fear though the banks themselves reiterate that they haven’t experienced any problems.

At the end of the day, your money is protected by the FDIC.

(Photo: zoliblog)


 Personal Finance 
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Garbage Island: Massive Floating Plastic Refuse

Did you know that there’s a floating patch of garbage in the middle of the Pacific Ocean? It’s called the Great Pacific Garbage Patch and it’s the size of Texas. TEXAS. It’s unimaginable… but now you don’t have to because a series on VBS.TV has gone to it and has pictures and videos.


It takes your breath away how disgusting it is and how irresponsible it’s gotten. I know some people don’t recycle on purpose because they see it as consuming more energy than it saves and others don’t bother because it’s a waste of their time. I suppose I can understand that (no not really), it justifies their behavior, but how can you justify letting things get to this? It’s insanity. Recycling, at the very least, keeps this stuff out of the water.

If you watch that little clip all the way through, the scariest part comes at around 2:30 when the guy talks about Bisphenol A (BPA – used in hard plastics) making women infertile… shades of Children of Men.

(The series also went to a lot of other places like Brooklyn, Alberta, and West Virginia.)


 Personal Finance 
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Weekly Roundup: Interviews

This week I had the pleasure of chatting with Tess Vigeland of American Public Media’s Marketplace Money show, BeingFrugal.net’s Lynnae and Steve of Brip Blap for an upcoming segment on personal finance bloggers. It was a lot of fun and an honor to participate in a show that I listen to every week (I listen to the Morning Edition and daily show every day, Money is only on during the weekends) and a lot of fun to chat with Lynnae and Brip Blap . I don’t know when it’ll appear but I’ll keep you all posted.

Why not start the roundup right with a couple posts from Lynnae and Steve? Steve’s latest post is about work life balance. We deal with it here as well, my wife has a 40 minute commute that artificially inflates her “at work” time by an hour and a half each way. Fortunately her office is moving to a new facility five minutes away, but for many the answer isn’t that easy.

Lynnae has a great vacation tip for her Tightwad Tuesday series: rent a vacation home. You pay a little more but you get a lot more than if you go the regular hotel route.

Interviews!
I also had a little three question interview with Shark Investor in which I bared my soul, shared all the secrets I knew, and gave away money. I actually didn’t do any of that but I did answer three questions and had a good time doing it, go check it out. :)

Preparation Is Crucial
What separates the people who are financially successful and those that find themselves always mired in debt? Preparation. Money Saving Mom is a blog I just discovered that I absolutely love. Besides compiling all the great couponing deals in an easy to read manner, she’s also what I consider financially successful. I have no idea what her bank account balance is but it’s not important because of how she responded to a negative comment on her site. A commenter lambasted her about van and how she should just buy a new car. She could buy a new car, but she hadn’t planned or prepared for it… so it’s not going to happen. “But here’s the deal: while we have money in our bank account, we don’t have money saved or allotted for a new vehicle or even a used vehicle.” That thinking separates those that are financially successful and those mired in debt.

Do Not Mix Business With Friends
A post on Alpha Consumer caught my eye this week, it was a sad story of a friendship gone wrong in a business transaction. If you want a legal perspective on the case, Kim called on Kathryn Dickerson, a partner at Smolen Plevy, a Vienna, Va., law firm.

If you want my opinion, it’s that if you mix friendship with business, be very clear in expectations and get everything in writing to avoid conflicts. I’ve heard many a story where friends thought there was an understanding… until there wasn’t, because nothing was written down and memories fade.

Unlimited Usually Doesn’t Work Out
We, as human beings, are really bad at predicting usage and so this Consumerist article about NYC Unlimited Metrocards, which is highlighting a NYTimes article, isn’t that surprising. We usually overestimate how much we plan on using something and so the a la carte option, of paying as you go, may usually work out better than the unlimited option. Ahhh we are so predictably irrational!

Here are a few other great posts in the blogosphere you should check out:

Have a great weekend everyone!


 Frugal Living 
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Low Cost Weekend Idea: Borrow Library Videos

This week’s hot low cost weekend idea comes from something my wife and I have been doing lately, borrowing movies and television shows from our local library (that’s where we continued our Enterprise fix after HDNet experienced contractual problems broadcasting it in HD). We borrow more television shows than movies (two hour movies are a much longer time commitment than bite-sized forty-minute television shows) but either way, the total cost of renting them is $0. Granted, we benefit from living within walking distance from the movie so if you have to drive, it might cost you a couple dollars in gas to get to and from the place.

It beats going to the movies at $8-$10 a pop or renting something at Blockbuster for $4-$5 (I don’t even know how much movie rentals cost).

One important tip: Don’t be late with returning videos. The penalties for late returns on videos is typically higher than on books. At our library, the late fee for a video is 50 cents. The late fee for a book is a nickel.

Another important tip: If your library offers online account access, sign up. If they offer online account access, they will usually offer online renewals of rentals too. Then, after you rent the movie, book, or television series, immediately log on and renew the video. At our local library, we can renew titles for two rental periods, as long as there is no one waiting, and I often do. Longer rental periods mean smaller chance of being late, especially when you’re talking about DVDs with four television episodes each.

Good alternative: Red Box. If you don’t have a library nearby or the library has a poor selection of video rentals, you could always visit a Red Box kiosk. You can always find Red Box promotional rental codes that give you a free one day rental (otherwise it’s only $1 plus tax per day) with a quick search online (and you can use each code once per credit card).


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