When 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?

Is there still a stigma against “synthetic,” or man-made, diamonds?

Nearly a year ago I wrote about an ethically-sensitive fiance-to-be’s dilemma: should he buy a larger synthethic diamond engagement ring or go with a smaller but “real” diamond engagement ring? The experts naturally advised him to be honest but the question remains whether there still is a stigma over having a man-made diamond versus a Mother Earth-made diamond.

I think the movie Blood Diamond awakened many to the atrocities surrounding the mining of diamonds but I don’t think it has or can overcome the years of powerful marketing and “tradition.” (Many still drive SUVs, fail to recycle, and do other Earth-unfriendly things in the wake of An Inconvenient Truth) I bought a Mother Earth-made diamond (I was aware of the atrocities surrounding the mining of diamonds in certain areas of the world; for me, I wasn’t aware of man-made diamonds and so I never made a choice) for my man-made lovely wife to be, but given a choice I’m not sure what I’d do.

However ultimately (and sadly), it’s all about comparisons. When people with engagement rings get together, both men and women, the question of size, color, clarity, and cut always comes up. People say they aren’t comparing, but they are. Ladies want to know who has the biggest, sparkliest, etc. and men want to know who bought it. So which is better, a larger synthetic or a smaller natural? The ones with the larger synthetic can sleep knowing they have the larger one, the ones with the smaller natural can sleep knowing they have a real stone. (of course the real bottom line is that it doesn’t really matter, you can’t eat, live in, or drive a diamond)

What’s your take on diamond engagement rings, be it naturally occurring or man-made? Natural is best? Synthetic is best? Everyone is crazy about these sparkly stones and we should be focusing on other things? And when you get a chance, check out this Smithsonian article about how synthetic diamonds are now as good as real ones.

(And what’s up with diamonds anyway? If I was a woman, I’d prefer another gemstone with a little more color, life, vibrancy, character, I don’t know… but then again my opportunity to be different, my wedding ring, is a solid gold band so what do I know)

(Photo by fensterbme)

I always suspected that not all the panhandlers (or beggars, whatever term you prefer) were in the situations they claimed to be in and had heard unsubstantiated stories about “professional panhandlers.” One rumour back in Pittsburgh was that a particular panhandler on Forbes near PITT owned an Escalade (this was something I heard eight years ago, before high gas prices) and was seen turning the corner and hopping in it after “work.”

(read full article…)

I’m clueless about a lot of things but the number one thing on my mind lately has been risk in investing. I don’t mean stock market investing or real estate investing, I meant the concept of investing and risk (specifically, determining and being paid for taking risk).

Most people associate investing with the stock market because that’s the easiest way to invest. The stock market is the perfect investment system in that your assets are pretty liquid and the barriers to entry are low. It’s absolutely free to open a brokerage account and trades are dirt cheap (cheapest is $0 a trade at Zecco, but that has gotten mixed reviews; second cheapest reputable brokerage is TradeKing). You can buy and sell stocks pretty easily as there is never a scramble to find interested parties, though the price you get may not be to your liking. You hope for good equity appreciation (increase in stock price) and perhaps take some cash flow along the way (dividends). The rate of return on the S&P has been around 10% for the last 80+ years.

Now take the second thing people associate with investing - real estate. In real estate, the assets aren’t as liquid (especially now!) and the barriers to entry are much higher. At best you have to come up with a downpayment and transaction costs (Realtor fees, lender fees) are high, fewer people get involved in real estate investing. (Over the next two weeks I’ll have four guest posts going over real estate written by Trisha Allen, a seasoned real estate investor, so if this is up your alley keep your ear to the grindstone) With real estate, again you hope for good equity appreciation (increase in home value) and perhaps some cash flow (rent) along the way. The rate of return on this has generally been about inflation (surprisingly) according to some experts (they could be wrong).

There are other means of investing (such as owning your own Rita’s Italian Ice!) but the gist is to put your hard earned money to work for you. However, how do you analyze risk?

Every risk analysis class I’ve taken, be in undergrad or for the MBA, has always explained the same thing. You take the severity of a bad event times the probability and that’s your risk. They never talk about how to guesstimate the severity or the probability, just that you multiply and some magic number comes out. Also, they never talk about how much of a payoff you should get for shouldering how much risk. Real estate seems riskier to me than the stock market (higher barriers, more money involved, more headache), yet the stock market has greater returns. One expects riskier investments to yield greater returns.

Anyway, that’s what I’m clueless about, how about you?

(Photo by Patrick Haney)

Earlier this week Nickel sent me this awesome video about someone building a ridiculously posh treehouse in their backyard. The video’s background music is If I Had A Million Dollars done by the Barenaked Ladies Bluegrass Tribute (I think!) and so I thought to ask a few personal finance bloggers what they’d do if they had a million dollars. Would they build a treehouse in their yard?

Surprisingly none of them wanted to build a treehouse in their yard. In fact, the vast majority did exactly what responsible pfbloggers always advise people to do, pay off debt, save for the future, and then spend a little of the rest on yourself. Here’s what they said:

Flexo said:

Start a foundation promoting arts education, a million is just enough to get it started.

Paid Twice said:

I’d get out of debt, buy my parents a house where we live, pay taxes, give 10% away, and whatever is left, put into retirement and college savings for the kids.

Nickel said:

If a million dollars suddenly fell into my lap, I’d invest the vast majority of it. The concept of “financial freedom” is very attractive to me, so I’d focus on building up that nest egg. I’m not saying that I’ll necessarily quit my job when we reach that magical crossover point, but it’s hard to put a price on being in a position to make that decision.

JD said:

I would leave it in the bank. I’m old and boring.That’s not quite true. I’d put it in index funds until it reached $2-$4 million, then go all Suze Orman and shit, putting it into bonds and living off the proceeds.

Lynnae said:

[I double posted one quote and managed to lose Lynnaes....]

MrsMicah said:

Get out of debt, buy a house, help out our parents, give some to church/charity, and invest the rest.

MoneyWatch said:

Pay off mortgage (approx $300k) save $300k invest $300k and spend the rest - holiday, car etc.

NCN said:

I would purchase a nice home on a few acres, and put the remainder in savings. Over time, I would use the savings to pay for kids college and future ‘major purchases”. And, I have one or two close friends / family members that I would like to help.
I might upgrade a few things in our house, but the last thing I need is more ’stuff’. I’d use it as a major-league security blanket. We’re homebodies, but we might be inclined to take an extra vacation or two a year, if we had that kind of money in the bank.

Trent said:

Put it in something that earned a very secure 4-5% in perpetuity - t-bills or something - and then basically stop worrying about the day-to-day crunch of my life.

Cap said:

If I’d ever win the lottery or receive some large windfall, I’d love to be able say some grand things such as I’ll properly invest it and make it grow so that I can help notable foundations or charities. But when I really think about it, I think realistically I’d take care of my immediate loved ones first. It’s a bit strange… when I was much younger; I would most likely dream of the wild things I can acquire from winning the lottery. These days, as long as my family and loved ones are happy and content with their life, I’ll feel pretty rich — regardless of our material possession. This may sound like a cheesy canned response, but it’s the cheesy truth!

What would I do with a million dollars? I’d replace the roof to our house, buy my lovely wife a Prius, then invest the rest in a good mix of income generating stock market investments and subsidize our current income with the earnings. A million bucks is a nice chunk of change and makes for a good “life subsidy.”

What would you do with a million?

Early April, a man turned in a bag of loot that had fallen off a Brink’s truck (yeah, that really does happen!) worth $140,000 to the police station… and he got $2,000 for his trouble. Now, chances are that Eli Estrada would never have been able to keep the money had he actually kept it. Banks have that stuff on lockdown and they know the bill numbers and all that jazz. However, it’s still tempting to keep $140,000 in unmarked bills sitting in $20k stacks conveniently placed on the side of a road (I wonder if it had big dollar signs on it like in the cartoons).

My question for you, and you can answer anonymously if you prefer, is… what would you have done? Would you have kept it? What if you could totally get away with it?

My first reaction would be to take the cash. $140,000 is a pretty large sum of money and I think you’d be hard pressed not to at least imagine what you could do with it. In fact, I don’t think I’m going out on a limb here when I say that most people’s first reaction would be to keep it. However, I think that after a few moments of imagining what I could do with it, I’d come to my senses and get it back to the rightful owner. That money belongs to someone else, so by keeping it, even if you can get away with it, you’re still stealing and there’s no justification for that. (sorry if that biases your answer, but you can still remain anonymous!)

Plus, karma’s a bitch and she’ll always finds you.

(Cool photo by TW Collins)

Mrs. Micah, a great personal finance blog with a wonderfully personal touch to it and one of the blogs in my “Must Read” list, recently referred to a conversation on The Simple Dollar about the middle class. In her response, titled What’s Wrong With Being in the Middle Class?, she says:

Ideally, yes, I’d like to never have to work another day in my life. It’d be nice not to have to worry about money (though I’d still be careful how I spent it). But I know that I would still work because there are certain types of work I find challenging and meaningful.

I think many people aspire to be independently wealthy, able to do whatever they want, but fail to recognize that having a job and financial responsibilities puts structure in their lives. They fail to realize that, in the absence of that structure, very few of us become Tim Ferriss’s and more of us would share the fate of this unfortunate lottery winner.

Having to wake up to go to work, having 8+ hours of your day occupied, and having little time to get yourself into trouble is a comforting thing. You may not like it, but the reality is that you probably would be hard pressed to fill up a day if you didn’t have a job or a business to run. There’s a reason why so many movie stars turn to drugs… they have a lot of hours to fill and not a lot to fill it with.

It’s nice to do “whatever you want,” until you realize you have no idea what you’re going to do!

What’s your take on this? Am I off my rocker? Is money the ultimate goal? Or is it merely the oil that lubricates life?

When I was younger (starting around 2nd grade), my mom said that for every 100% I got on a weekly spelling test, I’d get a dollar as my reward. The spelling tests started all the way back in the first grade but really got going in second and third grades, but I’d routinely get a hundred in part because I was brilliant and in part because they told us the set of words ahead of time (my mom knew this). There would be maybe fifty words and then ten or twenty would appear on the test, it was a cinch to get a hundred and anyone who didn’t simply didn’t try or didn’t care. Anyway, as I grew older, the 100s were harder and the prize was made larger until I was in high school when it would be $10 per 100. By high school, though, I didn’t get 100s unless it was something trivial like a health test or something meaningless, so I never went to collect. Anyway, I ended up being a decent student, in part because of the incentive my mom provided, but this is a issue that’s a hot button topic for many parents. Should they “bribe” (or “reward,” as the proponents would say) their children for performance?

My opinion is that you can and should bribe or reward them for performance because that’s how the world works. You get a good SAT score, you are rewarded with admittance into a good college or university. If you get good grades in college, you’re rewarded with a good job. If you perform well at your job, you’re rewarded with more money (maybe!). Giving children incentives for strong academic performance isn’t going to ruin them for the world because the world rewards strong performance with money as well.

What prompted this Your Take post was an article from the New York Times where students were being paid to perform well academically.

What’s your take on this?

I’ve been working full time for five years now and have used TurboTax for the last four (I did it by hand the first year, I have no idea why!). I’ve never walked into a tax preparation store like an H&R Block or a Jackson Hewitt but my friends have and walked away with experiences that hardly warranted the $300 fees they paid. On one hand, my tax situation had been fairly simple for the last four years. Single income (one year I had two W-2s but that’s hardly rare), standard deduction, twenty minutes in TurboTax and I was done. I went to an itemized deduction two years ago because of the mortgage interest but that hardly registered. Two years ago I even added on a Schedule C for income generated from side ventures, again that wasn’t much of a curveball for TurboTax. I don’t have a complicated situation… why would I pay $300 for someone to ask the same questions a box would ask?

What’s your take on tax preparation? Worth it? Not worth it?

Check out the latest super-anti-counterfeit bill to hit the streets, it’s none other than the fiver and it debuted today with much fanfare over its added security feature and that humongous purple FIVE located on the back (picture below). Many of the added security features come from higher denominated bills (such as more watermarks and a security strip) and I was surprised that they would revamp a $5 with these security features, but what do I know. Here’s the back of the bill.

I’m a fan of the increased use of microprinting, where small, difficult to reproduce, text is repeated in numerous places. On the front, Five Dollars” is written inside the left and right borders. E Pluribus Unum (”Out of Many, One.” in Latin) is printed at the top of the shield in the Great Seal. USA is printed between the columns of the shield. Finally, on the back, USA FIVE is printed on the edge of the purple 5.

One cool thing I didn’t know was that the little yellow “05″s are arranged in a EURion constellation. Many color photocopiers will refuse to copy a document if it detects a EURion constellation pattern. Here I thought the “05″s were just randomly scattered. Many currencies use this EURion constellation pattern.

Now, I’m not a huge fan of the big purple 5 but it’s said that it is designed that way for the visually impaired, what do you think about that purple 5? Ugly? Pretty?

(Images from Wikipedia)