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Archive for April, 2008

How much exactly is a million dollars

Wednesday, April 30th, 2008

How much is a million dollars? or variation: What does a million dollars look like?

I have gotten quite a few of these searches coming through on google lately so I decided to sit down and figure out exactly how much a million dollars is just for fun.

Lets start with one dollar, which looks like this:

one dollar

Now lets represent a dollar with a dollar sign ‘$’.


Thats to make a hundred dollars.  I would have to make one hundred thousand lines like that to even represent one million dollars.   In order to represent a million dollars it would take up approximately 200 pages of this blog (at my resolution) of just dollar signs.

One million dollars in ones would weigh approximately the same as a mazda miata…but would be considerably larger.


-To count your ones, if you were counting 24/7 it would take you about three weeks
-If you lit your pile of ones on fire (eek)
-At current gas prices, you could buy enough gas to drive my 350Z  5 million miles, or if were possible you could drive around the world 200 times
-Assuming $2.00 for a liter of bottled water, you could buy 7 humans enough bottled water to drink for their entire lives.

If I get motivated maybe Ill find more sometime.

Engagement Ring: engagement ring and diamond guide plus financials

Tuesday, April 29th, 2008

So this article has like 50 pictures. I think thats a record. The length probably is too. In any case I found most guides out there incomplete, annoying, or trying to sell something so I am going to give you my experience.

So as you saw yesterday I am engaged a wonderful woman. The first thing I had to do when I was starting the process along was find an engagement ring. Luckily for me Lauren was pretty specific as to what kind of things she liked so I knew a good place to start. As I have written about before, and engagement ring is something I did not want to skimp on, but that doesn’t mean you shouldn’t look for a deal. Beyond all else buying a ring should be an informed decision so that you do not get ripped off. This is good for both men and women to understand. So lets start off with the basics and follow my decision tree. I should note I am focusing on a traditional diamond engagement ring: not all engagement rings are diamonds, they can be anything you want. I even know of someone who carved their engagement ring out of wood…its up to the couple, but since I am following my process, ya get diamonds in this article! The financial and budgetary parts are at the bottom so if you don’t want to know all of the basic info, you can skip right to the bottom

The ring or “the setting” as the fancy term for it is:

You have generally a choice between gold, white gold, and platinum. The three, that order, are presented below:

gold engagement ringwhite gold engagement ringplatinum engagement ring

When selecting a gold band (yellow or white), definitely get at least 18k (karat) gold. The differences between white gold and platinum are beyond the scope of this article but suffice it to say, they are very close in look (but NOT the same in chemical make up). I already knew Lauren liked white gold so I knew where to start.
Next you have to pick if you want accent jewels or not. This means if you want other stones around the diamond. The rings shown above are all “Solitaire” which is fancy Latin speak for “all by itself.” Some other typical arrangements are:

three stone engagement ringfour stone engagement ringmulti stone engagement ringcolored stone engagement ring

Three stone engagement ring, five stone engagement ring, multi stone engagement ring, and colored accent engagement ring (in that order). In my case, I knew Lauren liked the style of #2 with 5-7 stones surrounding so I went with a similar one.

Now to the main event, the diamond.

I am the first to admit, I hate diamonds. Why do I hate diamonds? They are an artificially created market. Diamonds are not a commodity. Most people think they are like gold but they are not. Gold is fungible which means that quantities of gold are freely interchangeable. Gold’s purity can be readily assayed and it basically indestructible, making it a reliable store of value. It can be melted down and reused. Gold’s price has remained high throughout all of history. Diamonds on the other hand, contrary to the James bond film, are not forever; they can be damaged or destroyed. The value of diamonds varies widely depending on grade which is completely arbitrary. Diamonds are controlled mostly by the De Beers cartel and fund a lot more African warfare than we as Americans like to think about. All that being said, am I going to be the one who doesn’t give my girlfriend a diamond ring when all of her friends, coworkers, and family have them? No. But should I ever meet a top De Beers exec in a dark alley, I would congratulate him on a genius business strategy and promptly give him a good beating for just now within the last few years cracking down on blood diamonds.

So diamonds are rated on four things: color, cut, clarity and carat (not the same as Karat)


There are specifically colored diamonds which are out of the scope of this article. Color as I am referring to it is in reference to its whiteness, or more correctly: colorlessness. Most all natural diamonds contain small quantities of nitrogen atoms that displacing the carbon atoms within the crystal’s lattice structure. These nitrogen impurities are evenly dispersed throughout the stone, absorbing some of the blue spectrum, thereby making the diamond appear yellow. The higher the amount of nitrogen atoms, the yellower the stone will appear. Below is the scale:

diamond color scale

That breaks down into:

Diamond Color Designations

  • D, E, F – colorless (white)
  • G, H, I, J – near colorless
  • K, L, M – faint yellow or brown
  • N, O, P, Q, R – very light yellow or brown
  • S, T, U, V, W, X, Y, Z – light yellow or brown

Diamonds with a faint tinge of color (K, L, M, N, O) have a slightly warm color and are more affordable. For those who want a larger diamond within a certain budget, selecting diamonds with a lower color grade may be the best option especially if you are using yellow gold as your setting. Aside from Carat, color is the most costly piece of the puzzle.

Unfortunately white gold and platinum are less forgiving, though you can still get away with a “near colorless” without seeing much color. That was my original plan, to get a G or H color diamond. The only problem was, no matter how I looked at it, anything less than an “F” I could see yellow and it bugged me. Here are how they look from the side:

diamond colors

So I ended up going with an “E” color.


diamond cut

Ok so as you can see, cut is fairly self explanatory as to what it means, but it is actually fairly complicated. When jewelers judge the quality of a diamond cut, a lot of times they rate it as the most important of the “4 Cs.” The way a diamond is cut is primarily dependent upon the original shape of the rough stone, location of the inclusions and flaws to be eliminated, the preservation of the weight, and the shape. Cut is not shape: shape is the outward appearance, the cut is the facets, symmetry, polish, and all the other specifics that make it sparkle.

diamond cut

When a diamond has a high quality cut (ideal cut), incident light will enter the stone through the table and crown as shown above and travel toward the pavilion where it reflects from one side to the other before bouncing back out of the diamond’s table toward you. This phenomenon is referred to as “light return” which affects a diamond’s brightness, brilliance, and dispersion. Any light-leakage caused by poor cutting, will reduce the amount of light returned, and how good the diamond looks. Here are a couple representations:

diamond cut

Long short of it, don’t skimp on cut. The ratings are:
* Ideal Cut
* Premium Cut
* Very Good / Fine Cut
* Good Cut
* Fair Cut
* Poor Cut

Go no lower than Very Good cut. The good news is that generally the price increase is not prohibitive because most people cutting diamonds are skilled and have no reason to cut them poorly. I went with ideal, as I wanted it to sparkle as much as possible.

Clarity refers to how free a diamond is from tiny little (generally microscopic) imperfections inside the diamond. Diamonds are assigned clarity grades based on what can be detected with 10X magnification. If there’s a microscopic piece of dust on a diamond, it affects the clarity grade. The thing is, most imperfections have almost no impact on the brilliance of your diamond. So, if small clarity characteristics don’t affect a diamond’s beauty, why are diamonds with higher clarity grade so expensive? To pay for rarity. This means that you do not need a very clear diamond because you will not be looking at the diamond under 10X magnification, you will be looking at it with your naked eye. The way they are rated:

Diamond Clarity Designations

* FL – “Flawless” no inclusions at 10 x magnification
* IF – “Internally Flawless” no inclusions at 10 x mag.
* VVS-1 – “Very Very Small” inclusions hard to see at 10 x magnification
* VVS-2 – “Very Very Small” inclusions. VVS1 better than VVS2
* VS-1 – “Very Small” inclusions visible at 10 x mag. – not naked eye
* VS-2 – “Very Small” inclusions VS1 is better grade than VS2
* SI-1 – “Small” or “Slight” Inclusions or “Imperfections” still invisible to naked eye
* SI-2 – “Small” or “Slight” Inclusions or “Imperfections” may be visible to naked eye, may not
* SI-3 – Inclusions large, probably visible under inspection
* I1 to I3 – Starting to suck

diamond clarity

You just have to see and decide. I recommend anything over SI2/S2. I couldn’t see anything until then when I was comparing the two. I ended up going with the Very Slightly Included.


Carat is the one that most everyone knows so I wont spend much time on it. The Carat weight largely determines the cost of the diamond and it is the obvious “size” you see. Carat is the measure of weight of a diamond. 1 Carat = 0.2 grams or 0.007 ounce. The table below gives a frame of reference (not actual sizes):

carat diamond

So anyway, that about covers it. On to some more finance specific things:

What is the most cost effective diamond?

The real answer is “it depends.” You really have to look for yourself. But since I hate when people say that, I will give my general opinion. From a pure “cost effective” basis, I believe the best deal would be an ideal cut, H color, I2 clarity, .99 carat diamond would be your best bet to get a good sized, fairly colorless, and acceptably brilliant diamond. A quick look on bluenile.com and I found that exact diamond for under 4k. (.99 gets you close to a carat without paying the “over 1 carat” premium).

A few things to remember when buying an engagement ring:

1) Stick to a budget
Don’t get carried away and put yourself into a poor position because you get carried away. If she is unhappy with you after you have tried hard to get something beautiful for her, you probably shouldn’t be marrying her anyway.

2) Ask for a discount
Diamonds have one of the most ridiculous retail markups of anything you can buy. If you are ready and willing to walk away from a jeweler they will cut you a good discount. Their markups are anywhere from 40% to 1000%. Ouch. Avoid “mall” stores, they are the biggest rip off.

3) Know your to be fiancee
Getting something expensive is nothing compared to getting something you know your other will love. Seriously, spend some time, do some investigation, its worth it.

Im engaged! Whats happened and some financial lessons learned

Monday, April 28th, 2008

So, as many of you may have noticed, I haven’t been around since early last week, well Ive been busy…and on Friday night I asked my girlfriend to marry me.  She said yes, which makes me basically the luckiest the guy on the face of the planet.

Here is a pic of right after:


I have a series of posts that will be coming this week based on my notes that I took along the way that I think will be helpful.  Sorry for the downtime, as you can tell, Ive had other things on my mind. 🙂

Emerging Credit and the Future of Lending

Saturday, April 26th, 2008

Hello all, this is a guest post by Jonathon at Master Your Card. Thanks so much Jonathon especially on short notice. Where am I? Sick as a dog. Where is Jesse? Details monday.

As the effects of the mortgage meltdown ripple through the entire lending
community, the result is higher interest rates and stricter guidelines on
who qualifies for credit. In the wake of what could be termed as one of
the most devastating credit meltdowns in the history of the United States,
many empty-handed investors are searching for someone to pin the blame on.
And it seems that they’ve fixed their sights upon the lofty, mysterious
citadel of Fair Isaac Credit Organization.

Mortgage Lenders are crying foul play on Fair Isaac, citing major flaws in
the company’s popular FICO Classic credit scoring model as being the
underlying cause for the economic disaster that has taken the United
States by storm. What do these allegations mean for the credit industry?
Let’s take a look at a relatively new phenomenon in the world of credit
scores: the so called “emerging credit” scoring models.

Emerging Credit scores are largely the result of a shrinking market in
terms of the number of consumers who are considered creditworthy. As the
mortgage crises escalates, people who used to be considered an acceptable
risk to creditors are no longer eligible for even the most basic of credit
cards; but these companies still need to make money somehow, so where do
they turn to market their credit products if the old crowd just isn’t
going to “make the cut” anymore? The answer is found in the large clumps
of consumers referred to as the “unbanked”.

Unbanked consumers are those individuals who have little or no credit
history, either by deliberately avoiding all forms of credit, or simply
because they haven’t yet had the opportunity to establish credit for
themselves. Either way, extending substantial amounts of credit to the
unbanked has long been considered taboo by lending organizations, as the
FICO Classic scoring model relied on so heavily in credit industries
flagged such individuals as being unacceptable risks for investors. Now,
however, companies such as Pay Rent, Build Credit, are bridging the gap
between the unbanked and prime lending candidates.

For a long period of time, banks and other companies had little use for
organizations such as PRBC. Now, however, in an eager, if not altogether
desperate, search for qualified prospects, lenders are turning to
information brokers such as LexisNexis, PRBC, and credit bureau TransUnion
to dig up all the information they can find on an individual’s “unbanked”
payment history, such as cell phone bills, rent deposits, tuition,
magazine subscriptions, and so forth. Some agencies have gone ahead and
begun to utilize this information in new credit scoring models, dubbed as
“emerging credit scores”.

In all likelihood, it looks as if these new emerging credit scoring
systems will become mainstream in a few years. This would have a dramatic
impact on what credit card options are available to the average consumer,
since creditors will have a more complete picture of that person’s
financial behavior.

What does this mean for you and me?

It simply means that more prudence needs to be exercised with
traditionally unreported expenditures, particularly those expenditures
which occur on a regular and continual basis, such as subscriptions or
rent payments. As always, the new systems invariably favor those who are
financially responsible and live well within their means.

Oh boy, here comes inflation

Friday, April 25th, 2008

Well, the federal reserve has done it. As I was in the store today I realized “holy cow, things cost a ton more than they did a year ago.” And they do. What on earth has happened?

Well, for years now Americans have been going to town buying things on credit, getting crazy loans and spending like its going out of style. Unfortunately, exuberance extracts a price. The housing bubble has bust, and there is a debt crisis. The fed keeps pumping cheap money into the economy but the thing is, consumers, already strapped for cash, aren’t spending as much.

At the same time, politics and violence in the Middle East, Venezuela, and Russia keep adding to the global uncertainty that is pushing up the price of oil and natural gas. Breakneck growth in the developing economies of Brazil, Russia, India, and China continues to put upward pressure on prices of other key input commodities as well.

To make matters worse, the U.S. dollar has weakened severely against other major currencies over the past year. The U.S. dollar just doesn’t buy as many Euros, Yen, and Pounds as it used to. So, Americans must use more dollars this year to buy the same imported goods from Europe and Japan that they bought last year.

Perhaps most damaging of all, our elected officials in Washington, D.C. keep spending hundreds of billions of our hard-earned tax dollars – from both this year and, through debt financing, many years to come – like drunken sailors on shore leave..

In short, we have a U.S. economy awash in cash, a U.S. dollar beaten down by foreign currencies, and global commodity prices near record highs. The specter of a dastardly economic demon – inflation – rears its ugly head.

So the fed has been cutting and cutting and cutting and we have a nasty bit of inflation.

What does this mean?


Over time, inflation degrades the purchasing power of a $1 bill. Decades ago, the price of a loaf of bread was a mere nickel. Back then, you could buy 20 loaves of bread for $1. Today, the price of a loaf of bread is at least $2.00. For a $1 bill today your baker will hand you back just half a loaf. The bread didn’t change; the value of the $1 bill declined.

The erosion of purchasing power caused by inflation is why investing for the future is an absolute requirement for a financially successful life. For your investments to maintain for the future the purchasing power you enjoy today, the average annual rate of return on your investments must exceed the average annual rate of inflation in the general economy. To get ahead financially over the long term, your investment returns must trounce the rate of inflation by a wide margin.

Lets hope we get this beast under control (no more rate cuts fed!) or else things could get really nasty….really quickly.

Live the American dream, fix your problems

Thursday, April 24th, 2008

You wanna live the American dream?  You wanna fix your financial problems? Don’t live beyond your means.

There was such a positive response to our failing article that I decided to follow up on a little more direct and slightly less sarcastic take about living beyond your means.

Here is the US Savings rate historical graph, its a nasty thing to behold:

savings rate

Sadly, what you see above is true for a good portion of us. The U.S. Department of Commerce’s Bureau of Economic Analysis’ statistics suggest that the typical American family sometimes spends all of its cash and then dips into existing cash savings – or borrows cash from others – to keep spending even more. If the government’s personal saving statistics are to be believed (we all know how government statistics go, and many economists believe they are flawed), the typical American family is living beyond its means, choosing to live a lifestyle it truly cannot afford on the income its breadwinners bring home each month.

There is some good news though… your family does not have to live like the typical American family. Your family can choose to be different. You can choose to set aside part of your income each month to build up cash savings. Then, you can invest those savings wisely so that your family can pull ahead of the typical American family over time. After all, why choose to “keep up with the Joneses” materially when you can just as well choose to beat them financially? Is it challenging to do? Sure it is. But, you can do it. You just have to think radically.

Lets get sort of crazy, crazy like a fox, not like Michael Jackson

Let’s think radically for a moment. Would it not be a completely radical idea to do the exact opposite of what the typical American family does with its cash income each month? What would it feel like to save more cash than you spend each month? Think about it. Imagine paying all of your bills out of your monthly cash income yet still having more cash left over than what you just paid out in bills! Can you imagine that? Wouldn’t that be nice?

There is one easy way to do this. Spend a lot less per month! (Gasp)

Hey, I never promised that getting ahead financially was going to be fun, did I? Mentally and financially, cutting back on your monthly expenses is very dull, hard work, especially at the beginning. It requires you to make hard decisions and sacrifices, and to have patience. However, once you get started, your cash savings start to build up. You can then use this accumulation of cash savings to build wealth over time through the commitment of that cash savings to sound, long-term investments. So, the sooner you get started accumulating cash savings, the sooner you can choose to live off the income from your investments instead of the income from your own labor. Or, if you want to, you can choose to continue to work. That is the great thing about doing the opposite of the typical American family: you have greater freedom to choose what you want to do when you want to do it. This is what is meant by achieving financial security and freedom, perhaps the best way to have fun and enjoy life.

Yeah it sucks

I can hear the metaphorical room splitting down the middle. Some of you are cheering for me and others are gathering your weapons to come to my house. For the second group, I can hear you muttering to yourself how difficult and unattractive it would be to get radical: “Cut back significantly on my monthly expenses? Forget that, that sucks” Yes, it would “suck.” Significantly cutting back on your monthly expenses could dramatically alter the lifestyle to which you have become accustomed, perhaps a comfortable lifestyle somewhat beyond your means. You might have to move to a less expensive house or apartment in a different part of town. You might have to sell your current car and buy a less expensive, more fuel-efficient car, carpool with someone else, or take public transportation. You might have to stop eating out at restaurants multiple times a week and just eat self-cooked meals at home and at work. You might have to cancel your overpriced (and overindulged?) cable or satellite TV services. You might have to live without the latest gadgets and gizmos and just stick with the perfectly good technology you already own. You might have to forgo exciting vacations overseas and just take cheap road trips here in the good ol’ U.S.A. You might have to do all of these things until you are living well within your means, living a lifestyle you can afford to live on the income you bring home each month.

Trust me, things could be worse

Yes, downsizing your lifestyle would “suck.” But, do you want to know what “sucks” worse than slashing your monthly expenses so that you can save and invest for the future? I’ll tell you:

-Growing old poor, unable to afford to travel and visit your grandkids living with their parents – your grown children – in another city or state

– Having only meager Social Security or pension checks to live off of in your retirement or in the case of our generation, probably no social security at all.

– Living your final decades on Earth as a potentially unwanted financial burden on your grown children’s families and their own futures

-Having no choice but to work up until the day you die because, over your lifetime, you failed to create any personal wealth that enables you to choose to stop working in your old age

-Dying penniless, leaving behind no legacy of financial security for your family’s future generations

That is what “sucks” worse. And, that is exactly what a good portion of the people you know (some estimates put it as high as two in three Americans!) are going to do.


Do something

You do not have to live your lifestyle the way you live it today. Your lifestyle is largely a matter of choice – your choice. With the exception of financial obligations such as government taxes, court orders to garnish your wages, debt payments to creditors, or other payments for which you have a moral, ethical, or legal responsibility to pay, the cash you earn each month is your cash, and you alone choose to whom you hand over your cash each month. In other words, to save or not to save your cash is largely your voluntary choice.

Stash a large chunk of the cash you earn each month into savings – what a radical idea, huh? Well, if the U.S. government’s personal saving statistics are to be believed, saving cash apparently is a radical idea in early 21st century America. Each month, “financial radicals” across America choose to stash a large chunk of their cash income into savings – cash held at the ready to provide financial security and/or to fund sound, long-term investments. These financial radicals demonstrate a strong preference to save and invest for a brighter future than to spend their hard-earned cash on wealth-depleting consumer goods and services in the here and now.

What about you? If you have made the choice to do what it takes to build wealth over the long term, consider living a “crazy” lifestyle. To do so, make whatever lifestyle changes necessary for you to minimize the amount of cash that you voluntarily hand over each and every month to retailers, restaurants, finance companies, entertainment companies, utility companies, grocery stores, and others. Use the cash left over each month to build financial security and freedom for you and your family over the long term. It all starts when you refuse to live a lifestyle you cannot afford on the income you bring home each month.

Expensive cell phone? Cut it. Expensive car? Sell it. Expensive stuff laying around your house that you don’t need/dont use? Sell it and put the money in savings. Eating out every day? Stop. Personal trainer? Motivate yourself (and use resources such as fitnesstitans.com
Buying tons of groceries? Add a garden this summer. Still spending too much on gas? Ride your bike. Cut up your credit cards.

Its a battle, win it. Its the American dream, live it.

Top five investment mistakes

Wednesday, April 23rd, 2008

Investing is like the force. It can be your best friend or your worst enemy, a great ally or a terrible enemy. In most cases it is your best friend, but lets take a look at some of the most common mistakes that are made.

5. Confusing high risk and greediness …and… confusing conservatism and cowardice. This is for all of you P2P investors going after the 30% interest rates people…or those of you who probably got NASDAQ-ized in 2000. On the other side, there are all of you stashing cash under your mattress or having everything in that 3% ING savings account (but make sure and open one…see left sidebar).

4. Getting emotionally attached to a stock. A stock is not your friend, and it most definitely will not hold it against you if you sell it. Most people don’t even realize when they have fallen in love with their stocks, but you see it when they struggle to sell. If you need to sell, sell.

3. Getting under the boulder. “Do NOT sell Bear Stears, Bear will be fine” sound familiar? How about the people who bought it at half price? Then at quarter price? “How much lower can it possibly go?” The answer is, if a boulder is rolling downhill at you, get the hell out of the way.

2. Email Stock tips, enough said. Also, penny stocks, popular stocks, and stocks from internet sites that start with blog dot. If Jim on the corner says its a good stock, that doesn’t make it a good stock. Would you buy a car just cause Jim on the corner said its BA? Didn’t think so.

1. Paying high fees or expenses for load funds. Come to think of it, paying any sort of front or back loads at all. You involved in some mutual funds like this? Congrats, you are making someone rich, and I will give you a hint: its not you.

And remember ladies and gentleman: when your mutual fund manager starts complaining, tell him or her to mail all complaints to suckit@thepennysaved.com

Surviving Office Politics

Tuesday, April 22nd, 2008

tapeworm office politics

..so you finally graduated, what a relief. You are free to manage your time as you wish. You don’t have to think about your term paper topic for hours. You believe that all the difficulties are already behind. And it is…but it isn’t. You finally got that sweet job you’ve been waiting to get and you are going to save up and buy that Ferrari, travel to Greece in your time off and roll around in your money like a pig in his northwestern wallow. You and your coworkers are going to live in a hippy commune like bliss, have happy hours, and be like a giant family. Now all of that may be true but I have some bad news: even in the best of companies there are going to be office politics. Welcome to the real world.

-You are having a great first week in the office when you hear some of your co-workers talking about going for happy hour. You chime in “hey, that sounds great” and they all look at you like the white guy in the Godfather when he asks to be part of the family business.

-There is that one man/woman who just plain hates you and you can’t figure out why. They are rude to you and just downright impossible to deal with.

-You find a group of people gossiping about someone you have been getting along with

-You work your butt off and give them to a peer who promptly shows them to a superior while claiming it as their own

These are all common things that I have seen happen or heard about happening from various friends. Its not unique to any one company and you can bet you will find it going on in places from large companies to small companies to offices to churches (ladies rotary brawl anyone?).

The good news is that you are probably somewhat prepared for this having gone through middle school and high school. The bad news is that now it directly affects your money making ability.

When you get into your job you might be thinking “ah yeah, Ive got it made, I have all the essential qualities down PAT.” Your train of thinking may go something like this:

Drive – energy and your desire to work. Ive got it, I am the man (woman).

– Ive got this down too. In college I took my turns being the one to pump the keg.

Communication skills
– I am good at talking to people and getting things across.

Those are great and all, but there is one extra little quality that can be very helpful:

Savviness – this the the unspoken one that happens to be one of the most important. There are various forms of savvy, and you want to pick the honorable one. You will need to use your wit to overcome poor political situations. There are the people that that walk on others, and people that get walked on. Then there is the third kind of people that hold their ground while not throwing others under the bus. This is the area you want to be in.

There is always the ability to just “not play” the politics game but there is a good chance of losing favor and your perceived job performance can suffer. It doesn’t matter how well you are doing if Bob is taking all the credit for what you are doing.

So play the game. Dive into the politics but don’t sell your soul. Thats that middle ground I am talking about. Heres is your approach:

-Dont compromise your integrity or sell yourself short

-Stay away from gossiping.

-Stand up for yourself, always. Let people in a respectful way that you will NOT be intimidated. When you deal with people directly it cuts right to their core and and stabs a sword in their BS.

-Don’t be afraid of ANYONE. The most politically powerful people in the organization are not to be feared or to be sucked up to. They are to be dealt with honestly and respectfully but also directly and openly.

-Form relationships with coworkers. It makes a huge difference, don’t be the hermit.

-When things get nasty in a meeting and the words start flying, don’t get into it. If it goes on, get up and leave. If asked later why you left, be completely honest and say that you felt the conversation was unprofessional. Its as simple as that. There is a difference between a heated but respectful debate, and an insultfest.

-Be positive. Without optimism, work will not be fun.

-Be confident in your abilities and view yourself as an important contributor. You need to develop a good self image. It will not go unnoticed. Stand up for your own opinions.

-Don’t get emotional. Logic destroys emotion in the work environment. The cool calm person holds 100X more power and words fall 10X as heavy as the ranting screamer.

Epic battle: Is your house an investment? Matt VS Jesse dueling opinions

Monday, April 21st, 2008


Real estate is not an investment, it is a liability. Getting rich through real estate is completely based on your ability to distinguish between “good” and “bad.” That, Jesse my friend, is called speculation. But even taken a step further: your home is real estate, real estate is not an investment…you get the picture.

When you buy real estate at the market price, what exactly makes you think you will make a profit at some point? Is it because you think the home will appreciate in value? What makes you think that? The common answer of “because it always appreciates” is the sort of soft logical fallacy a lot of the banker lemmings used to decide to loan money to anyone with a pulse (and some without pulses). What makes you think that with any improvements you make your outcome will be greater than your investment (time + money) put in? Ah, whats the word for that again? Oh yeah, speculation my friend. A mutual fund is an investment, your home is not. And yes, this line of reasoning works…I know you are going to say “but mutual fund increasing over time is based on historical data” but one particular piece of real estate is akin to one particular stock: may or may not increase.

All of that aside, the definition of an investment is something that puts more cash in your pocket than it takes out on a consistent basis. So something that you put money into every month, including interest that goes directly down the drain, is not only not an investment but the antithesis of an investment.

Lets get back to that speculation thing. When you go to sell your house in ten years there are three outcomes: you sell your house for less than you bought/built it for, you sell your house for comparable to what you bought it/built it for, or you sell it for less than you bought it/built it for. When you factor in transaction costs, that means you are throwing away thousands no matter WHAT you sell it for.

Another thing we can’t forget is that you don’t even REALLY get to own your own land/house. Don’t pay your property tax? Now your stuff is the government’s stuff. Even worse news, you can pay your property tax on time for 100 years and the government wants to build a road through the middle of your house? Now your stuff is the government’s stuff (This is called eminent domain).


Well Matt, I know you’re pretty clever for an economics major (just kidding all you eco majors out there) but really, if pessimism was a sport you would be Babe Ruth. Just to set the record straight the definition of investment is actually “the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.”

I understand your line of thinking about appreciation, but lets use some common sense here: when was the last time the average house depreciated over the course of say, 10 years. Your argument may work on flipping real estate but when applied to your HOME it disintegrates faster than a UN resolution in Iran.

The thing is, I can’t remember the last time I lived in my mutual fund. I’m pretty sure I won’t be able to convince my girlfriend that my well diversified portfolio is a great place to come lounge around and I don’t think my friends will like it much either. This alone should be enough to put the argument to rest but lets look a little deeper anyway. Over the course of time you can either be building equity for yourself, or for someone else. So basically you either have some degree of speculation while building equity (buying) or you have a guaranteed negative return (renting). Which one of those two sounds better? Not only that but lets say you have other people living in your home (as I do) that pay you rent. Now they are building you equity too.

Then there is that little tax thing. Ah yes, taxes. Turns out, you can deduct a whole ton of things (you do read my articles, right Matt? 😉 ) if you own a home.

What shall we talk about next? How about capital gains. I love talking about how much I hate capital gains. Every bit we make on our mutual funds we get to pay out a piece in capital gains taxes. Guess what, gains made on your home sale are capital gains free. Thats right, 15% bonus my friend.

Finally lets take a worst case scenario, lets say there is a massive economic collapse. Which is more likely to hold up, your stocks or your land/home? Thought so.

It should be noted both Jesse and Matt own homes and understand there are pros and cons on each side.

4/20 Thats right, its my birthday, the April 20 links to my fav articles of the week

Sunday, April 20th, 2008

I just finished up some real work and since its my birthday, instead of writing, I am going golfing.  I haven’t put any links up lately so I picked through my RSS feeds for my fav articles this week.  Not only that but because normally people don’t like to read a ton of links I am only putting up my favorite three from the week.  It was tough to pick but out of the 15 I had sorted out, these are the three I decided on.  Happy Reading, and stay tuned tomorrow and watch me body slam Matt in  Matt VS Jesse Brawl #1: your home, investment or not.

Lazy Man – Money DOES buy happiness?

Consumerism Commentary – Most Wealthy people are self made.

PT Money – Budget Busters (and I agree)